Boosting Motor Third Party Insurance

The National Insurance Commission on December 22 announced 200 per cent upward review of premium and claims payable on Motor Third Party Insurance. Ebere Nwoji in this report reviews six months performance of the new premium rate and claims.

The upward review early this year  of both premium payable on Motor Third Party Insurance and claims emanating from it has no doubt redefined the face of  motor insurance policy in Nigeria.

Both motorists and insurers said the review has made the policy more meaningful, realistic and has positioned it as policy worth purchasing not just to pass through police check points, but to provide succor to third party road users when the unforeseen happens and save motorists from unexpected expenses.

According to them, the upward review  has also pushed the need for every responsible vehicle owner in Nigeria to ensure that he or she obtains the  Motor Third party insurance cover from genuine insurers, especially members of the Nigeria Insurers Association (NIA).

Insurance industry observers said the increase is justified because with the new premium rate and claims limit, both insurance sector operators and their regulator have demonstrated sense of seriousness in their business of indemnifying the insuring public when the unforeseen happens.

Insurers said between January 1, this year when the new rate took effect to date, their  turnover on the policy  and claims experience have gone high as motorist are now aware that there is claims attached to the policy.

For instance, Deputy General Manager Sales, Sovereign Trust Insurance Plc,  Mr Segun Bankole, said the new motor insurance rate is working as motorists have been paying and that claims experience has been extraordinarily high. 

According to him, more and more motorists are demanding for claims on the policy unlike in the past. 

He said between January 1  and now his company has paid over N500 million as  claims on Motor Third Party Insurance.

He said  his company was also experiencing huge claims on a particular policy he called Enhanced Third Party Motor Insurance, which in addition to paying for damages to the third party road users also indemnifies the policy holder for damages done to his own vehicle to the maximum tune of N500,000.

Motorists’ experience

On the part of the insured, it was learnt that unlike in the past, insurance underwriters pay claims from the policy. However a motorists whose vehicle was involved in multiple accidents  said his experience was that whereas the NICON Insurance, which insured the vehicle that caused the accident  paid claims to the policy holder, he was unwilling to fully pay for the damages rather he chose to   indemnify him in piece meal and has so far paid him two installments.

The motorist said insurance firms should insist on repairing the vehicle themselves or pay directly to the third party whose vehicle was damaged instead of paying to the policy holder. Industry observers said the new premium rate which is 200 per cent increase compared to the former rate was reasonable enough to put more money in the insurers’ vaults and enable them pay claims that emanate from the policy.

According to them, the new rate has taken care of current  inflation trend in Nigeria, “therefore insurers have no excuse for repudiating claims from the policy.”

On the part of the insured, the significant difference between the new rate and the old rate has compelled both NAICOM and the insurers to embark on public enlightenment on the claims attached to Motor Third Party Policy  in order to make motorists see the need to pay the new premium rate.

Industry observers said in doing this, NAICOM had  successfully brought to the awareness of even the least motorist the fact that there was  claim attached to the policy as such there was no more hiding place for any  insurer when the unforeseen happened to his client.

This is quite unlike before when everything concerning Motor Third Party insurance claims was shrouded in secrecy, as most motorists were totally ignorant of the fact that there is claims attached to Motor Third party Insurance policy.

As such, insurers seized the opportunity to misbehave by arbitrarily denying payment of claims from the policy. Some insurers charge ridiculous rates bearing in mind that the insured will not come for claims and even if he comes the insurance company will deny the claim. Aside this, activities of fake certificate hawkers on the compulsory policy was unbearable to the insurers until the industry came with the Nigerian Insurance Industry Data base (NIID).

Analysts, NAICOM Reacts

Industry analysts said with the situation on ground, the era of claims repudiation on the policy has  gone, “and it pays every wise motorist in the country to ensure that he obtained his Motor Third Party Insurance from genuine and licensed insurance company.”

On its part, NAICOM said with the new premium rate which it announced on December 22, 2022, every Motor Third Party Vehicle owner in Nigeria can now enjoy higher claim amounts in the event of accident for third party damage liabilities as well as in event of loss of vehicle following review of the premium rate for motor insurance in the country if the vehicle has comprehensive cover.

According to the commission, insurance companies under its  watch in the new era of increased benefits is sure to get compensated adequately  to meet their liability costs, particularly now that inflation and foreign exchange shortage have pushed up cost of living.

According to the commission, with its  new directive, private vehicles that were paying N5,000 premium  for N1 million Third Party Property Damage (TPPD) limit, are now to pay N15,000 premium for N3 million TPPD, while owner good vehicles are to pay N20, 000 premium for N5 million claims limit, and  staff busses are to pay N20,000 premium for N3 million claims limit.

This was contained in a circular issued 22nd of December 2022  by NAICOM and sent to all insurance institutions and signed by Leonard Akah, Director, Policy and Regulation at the Commission on behalf of the Commissioner for Insurance.

The circular stated, “Pursuant to the exercise of its function of approving rates of insurance premium under section 7 of NAICOM Act 1997 and other extant laws, the commission hereby issue this circular on the new Motor Insurance Premium rates effective from 1st January 2023. For commercial trucks and general cartage, they are to pay N100,000 premium for N5 million TPPD limit; Tricycles N5,000 for N2 million TPPD limit, and Motor Cycles N3,000 for N1 million TPPD limit.

“For comprehensive motor insurance policy, premium rate shall not be less than 5 percent of the sum insured after all rebates and discount. Beyond this, the review also offers motorists plying the ECOWAS Region the benefits of third party liability protection under the ECOWAS Brown Card Scheme. The card provides  motorist complete guarantee for a prompt, fair and immediate compensation for any accident that may occur outside his habitual residence country.”

Insurers’ View 

Insurers who spoke to THISDAY said the review has become inevitable adding that it would raise insurers sense of responsibility towards paying claims on accidents, which happens on Nigerian roads on daily basis.

The insurers said, ideally, it is supposed to reduce the incidence of road side fighting and obstruction by motorists involved in accidents.

Speaking on the issue, Mr. Muyiwa Awodire, a Regional Manager at Linkage Assurance Plc, said the premium hike came after 19 years.

He said, “The last time we had an increase in premium for third party motor insurance was in 2004. Now, if you consider the rate of inflation over the past 19 years, you will realise that the increase is long overdue. But beyond the hike, let us also consider the benefits. Until December 2022, the highest claim any one could make on third party motor insurance was N1 million because that was the limit. But that has changed now.”

He said a policy holder could  make claim of up to N3 million adding, “We all know how expensive vehicles have become now. So, it is in the interest of policyholders that they embrace the increase.”

Road traffic experts said driving is an unpredictable activity. “One  minute a vehicle owner was   cruising, enjoying the luxury of his  car, and the next, a little distraction causes him to crash into another vehicle. Depending on how serious the accident is, it could result in car damages and bodily injuries where he has  to bear the cost of repair or foot the hospital bills.”

According to them, this is where having third-party insurance makes the difference.

Benefits of  Third-party Insurance

Motor Third Part Insurance, according to insurers, takes care of unplanned expenses.

Besides being on the right side of the law, Third-Party Vehicle Insurance protects the policy holder  from unplanned financial exposures to legal liabilities resulting from being sued by the victims of an accident he caused.

A front line insurance underwriter, Leadway Assurance said its  Third-Party Vehicle policy provides a maximum cover of up to N3 million for the victim’s damaged vehicle and costs just N15000/per year. The company said its Motor Third Party insurance cover  also provides an unlimited cover for bodily injury or death of a third party.

The company said there is rising  number of vehicles with fake certificates on Nigerian roads.

“Total number of vehicles on Nigerian roads stands at  9.4 million, with  only 2.72 million vehicles having  valid insurance covers as of February 2021, according to NIA. Most fake insurance certificates are purchased  from unauthorised agents, but Leadway Assurance is changing that by bringing insurance closer to motorists, “it stated.

The company said its motor insurance offer ranges from Third-party insurance to hybrid Auto Base Insurance, “and even a comprehensive insurance policy that provides all-around cover not only for damages to the third-party but also damage to vehicle owner and his vehicle in the event of an accident. With the advent of technology, most insurance firms sell their Motor Third Party Insurance online.”

Anchor Insurance said its Third Party Motor Insurance indemnifies the insured in the event of an accident caused by or arising out of the use of his motor car against a third party vehicle.

“The cover protects the insured against damage(s) to a vehicle other than the vehicle belonging to the insured and all sums including claimant’s costs and expenses which the insured shall become legally liable to pay. What this means is that this policy does not take care of the policyholder against damages to his own vehicle, “it said.