Implementing Compulsory Building Insurance Act

With  implementation of compulsory building insurance act by the Ogun State  Government, after Lagos State, Ebere Nwoji reports that cases of building collapse across the country will abate  if other states implement the act

The Ogun State Government recently announced the implementation and enforcement of compulsory building insurance insisting that all buildings above two floors in the state must have insurance cover.

This is in line with section 64 and 65 of insurance Act 2003  which states: “No person shall cause to be constructed any building of more than two floors without insuring with a registered insurer his liability in respect of construction risks caused by his negligence or the negligence of his servants, agents or consultants which may result in bodily injury or loss of life to or damage to property of any workman on the site or of any member of the public.”

Sub section two of it explained that the  duty to insure under subsection (1) of this section shall arise when a building is under construction.

Subsection three warns that a person who contravenes subsection (1) of this section commits an offence and on conviction shall be liable to a fine of N250,000 or imprisonment for three years or both.

Section 65 in respect of insurance of public buildings states: “Every public building shall be insured with a registered insurer against the hazards of collapse, fire, earthquake, storm and flood.”

The act defines public building to  include a tenement house, hostel, a building occupied by a tenant, lodger or licensee and any building to which  members of the public have ingress and aggress for the purpose of obtaining educational or medical service, or for the purpose of recreation or transaction of business.

The section went further to explain that, “insurance policy under subsection (1) shall cover the legal liabilities of an owner or occupier of premises in respect of loss of or damage to property or bodily injury or death suffered by any user of the premises and third parties, adding that 0.25 percent of the net premium received by every direct insurer on policies issued under subsection (1) of this section shall be paid quarterly by every insurer into a Fire Services Maintenance Fund which shall be established, administered and disbursed by the  National Insurance Commission for the purpose of providing grant or equipment to institutions engaged in fire fighting services.”

Subsection 5 of the act spelt the punishment awaiting offenders saying, ”An insurer who defaults in making payment as required under subsection (4) of this section commits an offence and is liable on conviction to a fine ten times the amount payable provided that persistence in non-compliance with the provision shall be a ground for the cancellation of registration of an insurer.”

Despite the explicitness of this section of the 2003 act, builders, owners of building and occupants treat  the section with levity.

Cases of building collapse

The result is that cases of building collapse abound in different parts of the country with victims left in their own fate as in most cases the owners run away so as not to be caught by the law enforcement agents.The  BBC news on September 1,2024 reported that in Lagos, this year building   collapses were  on average of one every two weeks .

The BBC report quoted a Lagos based building expert as saying that in Lagos alone in the past 12 years, there have been cases of no less than 90 collapsed buildings with many lives and properties wasted without the least compensation because none of the buildings was insured.

The BBC report quoted the Council of Regulation of Engineering as saying that in these cases no less than 350 lives were lost.

The most remarkable building collapse recorded in Lagos was the 21 storey building collapse in Ikoyi which  happened  in 2021 in which 21 people were killed and investigation revealed that the building which was under construction had no insurance cover.

Aside the cases in Lagos, other states in different regions of the country also  record cases of building collapses, a situation which made Lagos State Government to implement the 2003 insurance act on building and building under  construction.

Analysts’ view

The recent implementation of the act by Ogun State government according to industry analysts is a positive development and a pointer to the need for other state governments to implement the act in their various states.

The analysts stated that implementation of the act will not only compensate the victims in case of risk but would also prevent construction of fragile structures as any insurance firm that will underwrite such business will ensure that the structure is solid enough to withstand pressure.

Indeed, the implementation of the compulsory insurance by the Ogun State government has elicited comments and suggestions by insurance stakeholders.

The Nigerian Council of Registered  Insurance Brokers (NCRIB), described the Ogun State Government’s enforcement of relevant  insurance policies as a step in the right direction, saying that it would  bring about economic growth and development.

The President of the Council, Prince Babatunde Oguntade, in a letter to the state Governor, Prince Dapo Abiodun, stated that the enforcement of building insurance policies would not only guarantee the safety of workers but is expected to bring about positive changes in the state’s economy.

Prince Oguntade assured the state government that the NCRIB would partner the state to ensure the fruition of the initiative.

In implementing the building insurance act, the Ogun  state government had made it mandatory for all classes of buildings above two floors to carry insurance certificate, stating that all constructions above two floors in Ogun State must obtain an All Risk Insurance Policy Certificate.

At a stakeholders’ meeting the state  Commissioner for Physical Planning and Urban Development, Mr. Olatunji Odunlami, noted that the enforcement of the compulsory insurances was in tandem with the provision of Ogun State Building Production Management Authority Regulation (OGB – PMA), 2022.

According to him, the All Risk Insurance Policy should be maintained by the contractor or developer and would cover both human and material assets during the entire construction period, ensuring that persons engaged to work on site or who have lawful access to be on site, as well as building materials and other equipment were protected against any form of injury, loss, or damage.

In his reaction to the development,a  member of the Publicity Committee of the Lagos State Compulsory Insurance building committee, Mr Segun Bankole  who is also Deputy General Manager Sales of Sovereign Trust Insurance,  said implementation of the compulsory building insurance aspect of the 2003 insurance act has been on the front burner even at federal level  but has not been effectively implemented.

He said the importance of the act was why Lagos State Government was at the front line of its implementation .

He said having Ogun State government following suit was a positive development.

He said adoption of the implementation of the act by all state government has become necessary given the increasing rate of building collapses in Nigeria.

He noted that at present, in some parts of Lagos like Lagos Island, there were many old buildings that are delapidated yet there are occupants and neither the building owner nor the occupants have insurance cover.

He said this is why it has become necessary for government at all levels to stand up and enforce the act by including compulsory insurance as one of the approvals a builder must obtain and the sign post of compliance mounted in the premises of the buildings before works start.

He however said before government would embark on the enforcement it must ensure that its agencies, ministries and parastatals insure their own structure ,

According to him, it is only when government insures its own property that it would have the moral justification to stop work at site for non conformity of the builders to the insurance act.

He recommended that government should set up Insurance approval agency that will  certify every builder of over two floors before work would commence.

He regretted that in other climes, there is nothing anyone does without first satisfying insurance requirements but in Nigeria, the reverse was the case.

Effort by NAICOM

On its part, the industry regulator the National Insurance Commission has made several efforts to ensure effective implementation of compulsory building insurance.

At the 2023 National Insurance Conference it organised in Abuja, the commission had inaugurated a 10 man committee to ensure enforcement and monitoring of insurance of public buildings and building under construction.

At the inauguration of the committee, the immediate past Commissioner for Insurance, Mr Sunday Thomas, had said: “We believe with this committee, the Nigerian insurance industry will never remain the same again. We believe also that we will redefine safety in the entire economy and also putting insurance at the center on the redefinition of safety in Nigeria.This same committee will be replicated at the state level and in another six months the industry will look at the impact of the committee.”