Addressing Group Life Insurance Policy Abuse

Like third party motor insurance, group life policy has suffered much abuses by private and public sector employers and their agents, writes Ebere Nwoji

The Group Life Insurance policy is one policy that supposed to make both public and private sector employees’ career interesting and attractive because of its ability to rekindle hope to families of both deceased workers and workers who suffered permanent disability.

The policy is designed to pay huge claims to dependants of employees who died in active service or those who suffered permanent disabilities.

Unfortunately, this particular policy has so much suffered abuses that for many workers and their employees, it is non-existent.

The result is that for many Nigerian workers, especially low and middle class workers, the moment the family breadwinner dies, the hope and living standard of his or her family automatically crumbles.

This is so despite that federal government annually makes huge provisions for Group Life Insurance of its workers.

The federal government in its budget this year appropriated N24.7 billion for Group Life Insurance of its workers.

The figure represents 65 percent increase in N15 billion budgeted by government for the same purpose in 2020.

Insurers admitted that in both 2020 and 2021, government made provisions and released fully the fund budgeted for the group life insurance of its workforce.

This is an improvement from the hitherto situation whereby government will announce the budget for the group life insurance of its workforce as well as funds for insurance of its assets but the release of the stated funds becomes a problem.

This improvement has been commended by insurance sector operators at various forum.

Former President, Nigerian Council of Registered Insurance Brokers (NCRIB), Dr. Mrs Bola Onigbogi, on this said: “the 2020 Group Life is off the schedule because full premium has been paid on the account for the current year. There is no lapse in cover at the moment.”

Onigbogi, who was represented by the Vice President of the Council, Tunde Oguntade, at a meeting with the NCRIB’s officials, however urged the federal government to always engage the services of the registered insurance brokers to mitigate the risk of contract failures.

View of Stakeholders

But insurance industry stakeholders noted that now that government willingly releases funds for the policy, what is not certain and therefore worrisome is how regularly and easily insurance firms accredited to provide cover for government workers pay claims from the Group life insurance contract.

The industry observers said they often hear how much government budgeted, names of insurance brokers and underwriters accredited to underwrite the business each year but that they hardly hear or witness when these insurers present claims cheques to the families of deceased federal government workers whom the policy is meant to cover.

Benefits of Policy

Group life insurance is a benefit that groups or employers offer to their members or workers. The insurance contract is usually between the insurance company and the group. Basically, the participating group members receive certificates of coverage. In Nigeria, the claim is usually three times the total emolument of the eligible worker’s annual pay.

The policy matures at death, accidents or any other conditions contained in the policy documents, its coverage for each worker is for one year after which it is renewed.

Insurance sector operators have often warned that given the prevailing “no premium no cover” policy, any year government fails to release funds for the policy, the family of its deceased worker whom the policy supposed to cover would not receive any thing from any insurance company.

Policy Abuse

Similar to third party motor insurance policy, the group life insurance is often abused by both private and public sector employers as well as government insurance officers.

Among the private sector employers, many do not want to hear it mentioned as a condition of service. What such employers often do is that when their employee dies in active service, they pay a visit to the family and perhaps give a paltry sum to the family.

This is so whereas Section 4(5) of the PRA 2014, provides that “every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover”.

Section 8(1) of the PRA 2014 provides that “where an employee dies, his entitlements under the Life Insurance Policy maintained under this Act shall be paid by an underwriter to the named beneficiary in line with Section 57 of the Insurance Act”.

Stakeholders in the policy regretted that despite these Provisions, employers hardly abide by the rules.

Indeed they violate it at random.

Among the private sector employers, they fail to package the policy for their workers while the public sector employers pay lip service to it. Unfortunately, these employers are often ignorant of the legal consequence of contravening Section 4(5) of the PRA 2014, which is civil and criminal. Section 4(6) of the PRA provides that:

“Where the employer failed, refused or omitted to make the payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any of the staff in its employment during such period”

Section 99 (1) of the Act goes further to state that: “Any person who contravenes any of the provisions of this Act commits an offence and where no penalty is prescribed, shall be liable on conviction to a fine of not less than ₦250,000 or a term of not less than one year imprisonment or to both fine and imprisonment.”

Regrets and Ignorance

Some government workers who spoke to THISDAY on the policy regretted that the above fine was so low that smart employers would prefer to contravene the Group Life Insurance law and pay the N250, 000 fine which is obviously much lower than three times the annual total emolument of most workers.

High level of ignorance of existence of the benefit at death by the workers themselves and their families often support their ugly act.

Indeed, investigations by THISDAY show that no deceased worker’s family has approached their breadwinner’s employer to demand for Group Life Insurance right.

The best they do is to approach the organisation and ask for any gesture the company would be willing to give to their bread winner and any amount the organisation decides to give as benefit, the family members grab it with joy thanking the management profusely without caring to calculate three times their breadwinner’s annual salary so as to demand for his right entitlement from the employer.

Abuses by Government

THISDAY checks reveal that even among public sector employers, the Group Life Insurance suffers the worst abuses from federal government and its agents.

According to findings, the policy is abused in diverse ways, ranging from initial non release of the fund budgeted for the policy as announced during the budget to non implementation of the budget on it, also non payment of the claims by the insurance firm in charge due to one reason or the other.

For instance, in 2014, it was once reported that out of N2 billion budgeted for group life insurance of government workers and insurance of government assets, only 10 percent was spent meaning that only N200 million out of N2 billion actually got to insurers while the balance of N1.8 billion went down the drain.

Industry analyst said only God knows the fate of government workers who died within the period.

In their analysis of what may have happened, they said under that circumstance, government agents who bid for the premium rate often collude with the insurers to cut the rate to the barest minimum with agreement that in the event of loss, the agents will not ask for claims.

This means the government insurance agents and the brokers or insurers agreed to underinsure the assets and the group life.

Similar thing happened in 2016 as six months after the expiration of the policy, it was not renewed as there was friction between the office of Head of Service of the federation and the National Insurance Commission (NAICOM).

During the period, federal government pronounced N60.3 million budget for its insurances including group life insurance but the National Insurance Commission (NAICOM) as government adviser on insurance withheld approval for the list of insurance companies and brokers that will be involved in the business.

During the period, THISDAY ‘s enquiry on the delay revealed that aside non approval of the insurers’ list by NAICOM, issues bothering on lack of funds, review of modalities for repositioning the scheme were responsible for the delay.

It was also gathered that NAICOM, as the apex regulatory body of insurance sector and adviser to the federal government on insurance matters, was irked by the lack of consultation by the Head of Service, Mrs. Winifred Ekanem Oyo-Eta, on processes of reviewing and repositioning the scheme for greater efficiency.

THISDAY learnt that although the Presidency gave approval, the shifting of responsibility between the offices of the Secretary to the Government of the Federation and the Head of Service of the Federation affected the timely renewal of the policy.

Also NAICOM’s non involvement in the selection of the insurance firms and brokers to underwrite the policy compounded the problem.

Implications

The implication of this power tussles and lack of willingness to accept responsibilities by the government officials in charge was that the renewal of the policy then lingered until around August /September of that year. Meanwhile, families and dependants of government workers who died within the period were left in their own fate, whereas claims from the policy supposed to bring succor to their wives and children.

Against this backdrop, the media was awash with reports and analysis over insensitivity of government and its agents to the policy and its administration .

To ameliorate the problem, NAICOM then came up with its adequate pricing policy by mandating the insurers to quote the official premium rate on all government insurances insisting that it would continue to monitor claims payment on all government accounts and would make sure that irrespective of low rate given by any insurance firm to corner the business, such firms must pay every claims emanating from government business underwritten whether the right premium was charged or not.

The commission, further advised government to appoint insurance desk officers who are core insurance professional to ensure that government insurances are well handled.

It further advised government to be alive to its insurance responsibilities through monitoring the implementation of insurance budgets.

NAICOM’s Effort

This effort by the commission has yielded the present fruits of timely release of budgeted funds for insurance and payment of group life insurance premiums, which insurers have been reaping since 2020.

Before now, due to ridiculous pricing of the group life insurance and insurances of government assets, some forward – looking insurance underwriters like Mutual Benefit Assurance jettisoned the business and focused on retail insurance by building robust agency system.

The Company’s Chairman, Dr Akin Ogunbiyi, told the media that he purposely withdrew from government account because it was very unattractive due to poor pricing system.

Managing Director Risk Analyst Insurance Brokers and former President Chartered Insurance Institute of Nigeria (CIIN), Mrs. Funmi Babington Ashaye, said government agents in charge of premium pricing for the business usually beat the rate to the skin.

She advocated for insurance operators who abuse the policy through rate cutting and non-payment of the resulting claims to be brought to book by both NAICOM and Nigeria Insurers Association (NIA).

The same was the story told by other insurers especially those who are ethical in their business dealings.

Indeed, Many of them lost interest in all government businesses.
But currently, the insurers are singing a different tune as premium for the policy is now paid timely.

This being the case policy stakeholders are interested in knowing how religiously insurers underwriting the group life insurance pay claims.
According to them this question arose because insurance firms in question have not for one day publicised claims presentation to any of the deceased government officers.

According to them, what the insurers do is to give a breakdown of total claims they pay in a year and state the amount they paid for Group Life but fail to show to the public when these claims were paid and to whom.

When THISDAY contacted the office of Head of Civil Service of the Federation, Dr Folasade Yemi-Esan which is in charge of the Group Life Insurance of over 89, 000 workers under federal government employment on the regularity of the claims payment, an officer who preferred anonymous said the office was not in charge of the monitoring payment of Group Life Insurance Claims but that PenCom was in charge.

Observers said this was not correct as Group Life insurance was purely life insurance policy that is administered by life insurers not penCom.
According to them, the Office of Head of Service suppose to monitor employees that died at any time and alert the insurance firm in charge for claims payment to the deceased family.

This implies that if a staff in the Office of Head of Service of the federation on whose shoulders the monitoring of the Group Life Insurance claims lies is ignorant of the role his office suppose to play in the policy administration and claims payment, one wonders how such office has been handling the issue of claims from the policy on behalf of government workers.

This has spelt the need for the office of Head of Service and every other agency of government in charge of workers’ Group Life Insurance to brace up to the challenge and give close monitoring on the policy administration and claims payment by the insurance companies in charge so that money budgeted for this policy will not be seen as annual government subventions by insurers.