FG’s Patronage as Catalyst for Insurance Sector Growth

Insurers are optimistic that they will reap bountiful premium this year with the allocation of N17.3 billion group life insurance for civil servants and members of the National Youth Service Corps by the  federal government, writes Ebere Nwoji

The federal government in its budget proposal for this year (2025)  allocated N17.3 billion for the group life  insurance of its workers. This is a significant improvement on the N9.6 billion allocated to the same policy by federal government in the 2024 budget.

According to government,  the above figure will be used to provide Group Life  Insurance cover for employees of Ministries, Departments, and Agencies (MDAs) of government as well as members of the National Youth Service Corps (NYSC). 

The government said the fund would also be used for provisions for administration and monitoring costs to ensure effective implementation of the program.

Section (9) subsection (3) of the Pension Reform Act 2014, requires employers to maintain a life insurance policy for all their employees. The act further mandates employers to pay at least three times the employees’ Gross Annual Total remuneration into the Group Life Insurance policy.

In the proposed budget, government said the policy extended  not only to civil servants but also to critical security agencies like the Department of State Services (DSS) and other public institutions.

It further said the N17.3 billion budget would support the life assurance policies and cover the administrative expenses involved.

This, in the view of budget analysts, reflected the government’s commitment to ensuring transparency and efficient fund management to provide a financial safety net for the families of deceased employees.

Checks by THISDAY reveals that 12 insurance firms will be involved in the group life insurance contract this year.

In 2020, government approved the sum of N15 billion for group life insurance of its workers. In 2022/2023, it approved the sum of N24.7 billion representing  64.7 per cent improvement  in the 2020 figure.

Looking at the allocations, one could see that the figure has been fluctuating and sources close to the present administration said approvement in the figure  is dependent on funds available as not all approved funds in 2022 was released by the government due to its financial predicament within the period.

Reacting to the 2025 N17.3 billion allocation,  insurers said it was a heartwarming development and  has added up to the aspiration of the industry to be more solvent. 

Speaking on this,  the Executive Secretary, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr Tope Adaramola, said  the federal government  must be commended for this increase in insurance allocation on those heads. 

“Government is quite sensitive to the inflationary trend and the increasing value of the insurable assets. It’s most noteworthy that premium for group life is also double the allocation for previous year”, he observed.

Commenting on the N4 trillion  allocated to infrastructure in the budget, Adaramola said it would definitely cover the risks associated with the unfolding risks in the construction of roads, of which the Lagos-Calabar and Badagry- Sokoto roads are inclusive. 

On the part of the industry,  he said there would be need for more intensive follow up with the government to ensure that the funds were  actually utilised for the premium as budgeted. 

“It is the conviction that with delivery of value there is no stopping the government as a client in seeing the value of insurance and continue to extend its insurance dragnet and allocations in future years. But by and large it’s a good development”, he concluded.

Also, former Chairman, Nigeria Insurers Association (NIA) and Principal Consultant, Carefirst Consult Limited,  Mr Gus Wiggle, said the significant increase in the budget allocation for Group Life insurance and infrastructure development in Nigeria’s 2025 appropriation bill was  a positive development for the insurance sector. 

According to him, the increase could be attributed to increase in minimum wage which has a direct impact on the benefits of the employees, resulting in more exposures for the insurance companies and an increase in premium and revenues but not necessarily enhanced coverage for the civil servants which is something that would have also expected. 

He said in overall, it showed government’s  commitment to insurance and welfare of the civil servants which according to him was  commendable.

 On the other hand, he said it was a sign of government’s confidence on insurance.

“I also see this as a show of confidence of this government on insurance and thereby improving the public perception of the sector and enhancing public trust,” he said.

On the N4tn allocated to infrastructure development, Wiggle said such allocation led to   economic growth which could  create more opportunities for insurance companies to offer new products and services.

He however expressed fears  on the fact that most of the projects did’t have insurance elements in the costing of the projects and where they have them, they mostly ignored insuring the projects. 

“I will therefore seek for a collaboration with government, working closely with government agencies to ensure compliance with regulations that all projects must be insured and a certificate of insurance will be parts of the documents to be submitted by the contractors of these infrastructure projects,” he insisted.

According to him, by leveraging the increased allocations effectively, the insurance sector can indeed boost its growth and contribute to the overall economic development of Nigeria.

Actuarial scientist and Chairman Anchor Actuarial Services Limited, Dr Pius Apere,  said  his first guess on the N17.3 billion  allocation to Group Life Insurance relative to N9 billion in 2024 might be due to increase in the insurance premium rate quotation introduced by the insurance regulator in the recent past.

He said in other words, there was significant increase in nominal value of the premium income in the insurance industry but not the real value of the premium income received.

“Unless there is an explanatory note to justify the approximately 100 percent increase in the allocation other than increase in premium rates quotation, group life premium income would  be available for investment in the insurance industry,” he stated.

He said  furthermore, more funds would be available to pay genuine claims in the insurance sector.

On the N4 billion allocation for infrastructural development, Apere said this  would require the use of general insurance policies for protection purposes during construction, building etc. 

According to him, this will in turn generate premium income for the insurance industry.

Insurers have  since after the budget proposal by government to the law makers expressed hope of better business year in 2025 in their projections and outlook in the year resting their hopes on  the huge funds released by government for Group Life Insurance premium and on premium that will accrue from insurances of infrastructural projects to  which government allocated N4 trillion.

But their hope according to the sector observers can only be realised if the insurers will be much alert and bold enough to fight for government to lead others  in implementation and compliance with laws on compulsory insurances like contractors’ all risk insurance.

It was for this reason that the National Insurance Commission (NAICOM) recently entered into partnership with  the Infrastructure Concession Regulatory Commission (ICRC) to mandate concessionaires of government assets to procure insurance covers for the assets under Public Private Partnership (PPP)  arrangements.

The two commissions reached the agreement when the Chief Executive Officer of NAICOM, Mr. Olusegun Ayo Omosehin led a management delegation on a courtesy visit to the Director General of the ICRC, Dr Jobson Oseodion Ewalefoh  in Abuja.

In his remark, the ICRC boss reiterated his earlier statement at a visit to the Minister of Interior, where he first noted that all strategic assets of the federal government must be insured, commending NAICOM for following it up with a visit.

He stated that insurance of PPP assets was not optional but mandatory as it was stipulated in Section 7(2)a of the ICRC Act (2005), which states that the project proponent or contractor, “Shall undertake appropriate insurance policy on the concession with an insurance company approved by the National Insurance Commission.”

QUOTES

“Section (9) subsection (3) of the Pension Reform Act 2014, requires employers to maintain a life insurance policy for all their employees. The act further mandates employers to pay at least three times the employees’ Gross Annual Total remuneration into the Group Life Insurance policy.

In the proposed budget, government said the policy extended  not only to civil servants but also to critical security agencies like the Department of State Services (DSS) and other public institutions.

It further said the N17.3 billion budget would support the life assurance policies and cover the administrative expenses involved.”