The Onerous Task of Enforcing Compulsory Insurance

The enforcement of compulsory insurance launched in different parts of the country in 2009 is still a big challenge to industry operators, writes Ebere Nwoji

Seven years after the launch of the six compulsory insurance policies nationwide, insurance industry operators are still grappling with the enforcement.

Indeed, the industry is still very far from realising the objective, which is to ensure that Nigerians are compelled by law enforcement agents to patronise these compulsory insurance policies with the overall objective of getting more Nigerians into insurance net and increase the industry’s premium income as well as the its contribution to the Gross Domestic product(GDP) of the economy.

The compulsory insurance policies are those classes of insurance made compulsory by law, with the objective of providing protection to third parties and the general public.

They include Builders Liability insurance under the Insurance Act 2003 and the Lagos State Building Control Law 2010; Construction All Risks insurance, Occupiers Liability under the Insurance Act 2003 and Lagos State Law; Employers Liability, (Group Life) under the Pension Reform Act 2004; Healthcare Professional Indemnity under the National health Insurance(NHIS) Act 1999; Motor Third Party Liability under the Insurance Act 2003.

By explanation, Builders Liability Insurance requires that all owners or contractors of buildings under construction that are more than two floors must purchase insurance cover to provide compensation in event of bodily injury, death and property damage to workers at construction sites and affected members of the public in the event of collapse of the building and other construction risks.

The Occupiers Liability Insurance requires that all owners or occupiers of public buildings, whether private or public, should provide the insurance cover under the National Insurance Act 2003 and the Lagos State Building Control Law 2010. According to the 2003, a public building is any building that is not 100 per cent used by the owner for residential purposes. Public buildings include tenement houses, hostels, residential buildings occupied by tenants, lodgers or licensees, and any other building to which members of the public enter and exit for the purpose of educational, recreational or medical services.

Employer’s Liability or Group Life Insurance requires that all employers of labour with more than three employees provide insurance cover for them as required by the Pension Reform Act 2004.
The penalty for non-compliance with this law is N250,000, record of conviction, and in addition the place of business may be sealed up.

The Healthcare Professional Indemnity Insurance is the policy that stipulates that all licensed health care providers and medical practitioners such as doctors, nurses, pharmacists, etc should provide insurance cover under the National Health Insurance Scheme (NHIS) 1999. The law stipulates that they should have insurance that will protect their patients in case of accidents or fatalities (death) resulting from professional negligence. This type of insurance provides compensation to patients and their relatives in the event of involuntary murder, disability, shock and injury suffered by patients as a result of the negligence of Health Care Providers. The penalty for non-compliance with this law is a possible revocation of licence by the National Health Insurance Council.

The third party motor liability insurance requires that every motor vehicle user should insure the motor vehicle against liability as to death, bodily injury or damage to property of a third party arising from the use of the vehicle. The penalty for non-compliance is a fine of up to N250,000 plus one year imprisonment.

Enforcement of these insurances was one of the objectives of the industry regulator, the National Insurance Commission (NAICOM) in launching its Market Development and Restructuring Initiatives( MDRI) in 2009.
After the MDRI launch, NAICOM also launched the compulsory insurance policies in the six geopolitical zones of the country.
The launch witnessed many activities by the industry players and the regulator such as road shows, posters, distribution of hand bills and other means of advertisement and awareness campaigns.
But despite all these efforts, the industry is yet to achieve its objective in this regard.
Indeed, pushing of the retail insurance from all sense of judgement is becoming a lot easier for the industry than the enforcement of the compulsory insurances.

Recently, both the outgoing chairman of the Nigeria Insurers Association(NIA) Mr. Godwin Wiggle and the president of the Chartered Insurance Institute of Nigeria (CIIN) Mrs. Isioma Chukwuma, said enforcement of the compulsory insurances has remained the greatest challenge to the industry.

This is so despite the all important nature of the compulsory insurance policies to the third party.
For instance, builders have refused to patronise the Builders Liability Insurance and Occupiers Liability insurance whereas cases of collapsed buildings that have killed workers at construction sites and public buildings that collapsed killing the occupants abound in different parts of the country.

Dependents of victims of these unfortunate incidents are often left uncompensated.
The third party Motor insurance which is the only one enforced by the law enforcement agents is often bought with the spirit of fulfilling all righteousness, as such, the buyers often buy from fake insurance operators for the purpose of crossing police check points .

The insurers, in order to guard against this, introduced the Nigerian Insurance Data base (NIID) with the aim of checkmating the activities of the fake insurance operators.
Despite this, recent report said that about 12 million vehicles ply Nigerian roads with fake insurance certificates.
The result of this is on overall premium generated by the industry which year in year out falls below expectation while the industry’s contributions to the national GDP remain static.

For instance, during the official launch of the builders liability insurance, insurers had projected that if well implemented, the policy alone would generate N10 billion premium annually for the industry.
But three years after, statistics released by NAICOM on premium from the compulsory insurances said that insurance in 2012, earned N28.68 billion from all the classes of compulsory insurance policies.

Even today, there has not been significant improvement just as enforcement of the compulsory insurance policies has remained a major challenge to the industry operators.
Outgoing Chairman of NIA, Mr. Godwin Wiggle, confirmed that the greatest challenge to the industry operators has remained enforcement of compulsory insurances.

Wiggle, said recent report on 12 million vehicles plying Nigerian roads with fake insurance certificates is an indication of how much the industry loses to the fake operators as well as how much revenue government at all levels lose to them.
He regretted that one of the things that make fake insurance operators to thrive in their business is because Nigerians like short cut in doing things, adding that those who Patronise them are Nigerians who don’t want to follow the right channel in doing things.
He urged Nigerians to ensure that they get their insurance services through the right channels because the fake operators will have nothing to offer to them in the event of claims.

He also advised government to play its role in this regard, pointing that although the insurers are doing their best in pushing the compulsory insurances like the third Party Motor Insurance which they do through Nigeria Insurance Industry Data base(NIID), government, has a big role to play in enforcement of other compulsory insurances like the compulsory builders insurance.
Wiggle, said ’’more and more Nigerians, now make effort to buy the third Party Motor insurance from genuine operators because the Road Safety officials are enforcing it in different states with heavy fines on defaulters.

He said if a number of state governments industry operators have approached for enforcement of builders insurance will take responsibility of enforcing it for security of lives and properties in their states, more Nigerians would patronise the policy.
He said this has become necessary because Nigerians like to be put under compulsion before they can obey laws.
Also Mrs. Chukwuma spoke on the need to implement the compulsory insurances nationwide saying the industry has lost a lot on account of the non enforcement of the policies.

She said against this back drop, the institute has embarked on awareness campaign in order to create awareness among Nigerians.
The Insurers Committee, at its June meeting, said it has taken decision to embark on rebranding of insurance industry with the youth as their main target.

At the mega insurance conference held by the industry last year, participants at the conference agreed to reach out to law enforcement agencies by way of collaboration to enable them enforce the compulsory insurances.
Industry observers said one of the reasons for non compliance with the compulsory insurance law by Nigerians is because government’s law enforcement agencies have not taken it serious to enforce compliance so Nigerians are violating the laws at will.
Insurers in recent time have approached state governments for the purpose of enacting laws on compulsory builders insurance since there are cases of building collapses in different states but only Lagos State government and IMO State government have done something on that.

Their only hope now is that the Insurance Act being amended by the lawmakers will spell out modalities for enforcing the compulsory insurance policies.