Allocation Delay:  Averting Risk of Cover Rule Violation

With on-going delay in release of government’s budgetary allocation to its insurers, experts said insurance firms underwriting government businesses may violate No premium No cover. Ebere Nwoji writes

Recent media reports have indicated that most federal government ministries, agencies and departments (MDAs) are yet to renew their insurances for this year due to delay in release of   allocations for insurance in the 2025 budget. This raises the question on the place of government in complying with critical insurance laws like the “No Premium No cover. The implementation of this law was kicked off by the National Insurance Commission (NAICOM) since January 1, 2013.

Similar reports also indicated that the same problem is starring the Nigerian National Petroleum Company Limited (NNPC) in the face regarding its insurances, as insurance underwriters and brokers appointed for the NNPC accounts are still waiting for their letter of appointment for the business; whereas their cover for 2024 elapsed since April 1, 2025.

According to media reports, at present, some of MDAs are out of cover, as their insurances have elapsed, while some are pleading to insurers to hold covers for a month, while waiting for the release of allocations from the government.

Analysts’ View

Analysts said government’s agents on insurance of its assets attributed the delays in renewal of the insurance cover to the recent two-day public holidays, but there are signs that in the next one month, these allocations may not be released. Insurance firms, however, fear that the brokers in charge of the business presently may plead that “No Premium, no cover” law for one month should be kept in abeyance, pending the time government would release the allocation funds.

This is because some insurance underwriters said, already some brokers have threatened to starve them of business should they insist on “No premium No Cover” law.

The federal government had allocated N17.3 billion for group life insurance of its workers for this year. Government also allocated N12.4 billion for insurances of what it described as its sensitive assets. These funds are to be released to various insurance firms and brokers approved to handle government insurance for the year.

Going by the “No premium No  cover” law,  until funds from these allocations are paid to insurance firms appointed for the businesses this year, both the government workers covered under the group life insurance policy and government assets for which the money is meant to  cover have no entitlement from any insurance company in form of claims should anything happen from April 1. 2925.

Insurance Act

This is in accordance with section 50 (1) of the Insurance Act 2003, which stipulates, “The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of any insurance risk unless the premium is paid in advance.”

Invariably, the law presupposes that no insurance cover shall be granted by any insurance company without having received the premium.

This delay by government to release budgetary allocation for insurance premium confirms the fear expressed by a shareholders’ right activist, Mr Boniface Okezie last week when confronted with the question on what is expected of President Bola Ahmed Tinubu on the much-desired presidential assent to the insurance reform bill that has been signed by the law makers.

In his response he said, “As good as the passage of the bill is, the problem with the Nigeria Insurance Industry is not just about passing the bill but implementing it to the later. Now that the bill has been passed and everybody is praying for the President to assent to it when signed into law who will implement it, NAICOM? I doubt it.”

He said the passage of the bill was very good adding that NAICOM has the right to be jubilant over it.  He however, stressed that the government may be the first to break the law through failure to patronise the sector by insuring its assets as required by the law.

“But the problem facing insurance sector cannot just be solved by the president assenting to the bill and enthroning the regime of new law in the industry. Government must lead others in patronising   the insurance sector by insuring all its assets with indigenous insurance underwriting firms not with foreign firms and paying the premium as and when due. We like foreign things but let them show example by making the laws work through insurance of their own assets,” Okezie stated.

According to him, “NAICOM itself should regulate to keep the souls of the companies alive,” he said.

NAICOM had on January 1, 2013 announced its implementation of “No premium No Cover” policy as one of its market conduct reforms targeted at transforming the insurance  industry to a N1trillion  premium market from N260 billion annual premium income the insurance sector recorded then.

Operators’ Reaction

Operators and stakeholders in the industry hailed the commission for the policy implementation, saying it was the best thing that could happen to the industry. This is because, prior to the announcement, insurance sector was enmeshed in huge outstanding premium that littered their annual reports and which they kept carrying over and over every year without single record of recovery.

THISDAY findings reveal that majority of these debts were owed by government through either non release of funds allocated to insurance or where the funds were released, government insurance agents and brokers withhold the money waiting for the year to elapse and if there was no risk occurrence, they  share the money without a dime going to the insurance underwriting company.

Insiders revealed that the quantum of outstanding premium in the annual reports of insurance firms at that time was so huge that NAICOM at a point insisted that every insurance firm must make provision for every figure reflected in its annual report.  On their part, insurers were very happy saying that the policy would put more physical cash in their vault and strengthen them to pay claims timely.

Insurers vowed among themselves to ensure that the policy worked so that the era of operating business on paper figures would give way to business operation based on physical cash. But an insurance broker who did not want his name in print, told the media at that time that the only thing that would slow down the success of the “No premium No cover” policy was unhealthy competition among insurers, especially  in insurance of government businesses.

This, according to the broker, was  because while one insurance underwriter or broker will insist on complying with the law by not granting cover until premium is paid; another insurance broker and its underwriting firm would be so overzealous over participating in government business that they would position themselves to provide the cover without premium being paid if only to grab the business.

Looking at what is playing out in both NNPC business and MDAs where the brokers were pleading for one month cover obviously without premium, this is where the problem of the operators lies. From this point, it will extent to two months, three months or even six months. This has raised the question on what role is government actually playing in Nigerian insurance sector in term of patronage, regulatory implementation among other areas? What is the position of NAICOM on this as the industry’s regulator and federal government adviser on insurance matters?

Indeed, a critical look at the industry regarding sales of policy and premium payment reveals that “No premium No cover” policy has not been as successful as one had thought. Checks by THISDAY revealed that whereas NAICOM and other stakeholders in the industry celebrated the success of the policy, in practical terms, the policy is a ruse.

Insurance Managers’ Reaction

The Brand and Business Development Manager of one of the new generation insurance firms in Lagos confided in THISDAY that the “No premium No cover” policy was not working because of dubious activities of insurance brokers and their government insurance agent’s cohorts.

The manager who anonymity because brokers would feel exposed and stop giving his company business lamented that the policy would have been a very beautiful one   capable of redefining the face of insurance sector but for the brokers’ attitude.

He said whereas “No premium No cover” policy stipulates that every business placed by brokers must be paid within the maximum period of 30 days, many brokers place business with insurance firms, collect money from the clients and hold back the money for as long as one year and when he sees that there was no risk occurrence, he would pocket the money.

He said the brokers would place the business, issue credit note to the insurer but would not pay the premium.

Asked why the underwriters condone such brokers and will not report them to the regulator, he said because if you do, they would blacklist your company and would not want to give your company business in future.

He said this explained why in most insurance companies’ books you see so many premium debts written off because it is obvious it will not be paid.

He lamented that if not the brokers’ attitude, “No premium No cover” would have drawn insurance firms out of doldrums.

He however said with direct business, aviation class of business, and some class of oil and gas business, the policy was working perfectly.

He also said insurance agents remit their premiums without delays.

NAICOM’s Expectation

THISDAY recalls that during the flag off campaign on implementation of the “No premium No cover” the  then insurance commissioner, Mr Fola Daniel, said the implementation of the law  was expected to significantly improve the cash flow of insurance institutions in the country adding that it was expected that the positive turn of events in the implementation of “No premium No cover” law would impact on the capacity of operators to settle claims promptly, thus removing a major sore point in the relationship of insurance consumers and service providers.

Insurance underwriters lament that while they keep writing off huge outstanding premium owed by insurance brokers, such brokers were busy buying houses in GRAs with insurance premium paid to them by the clients.

According to the business development manager, the brokers’ activities is aided by lack of cooperation among underwriters.

He said when an insurance underwriter tries to shun a brokers’ business because of bad experience in the previous business he placed, within the same period another underwriter, a bigger and more robust player would invite the broker and sign the contract without stress.

Querying whether this is how the insurance industry would build the much talked about trillion Naira market, the insurers called on NAICOM to review “No premium No cover” policy and monitor adherence by brokers.

At the initial implementation of the “No premium No cover” policy, its beauty inspired neighbouring countries like Ghana to adopt similar policy in their country.

With what is currently playing out in this year’s government insurance business, industry watchers said it is high time insurance underwriters in their trade union meetings should put heads together and decide to get the brokers do the right thing by insisting on “No premium No cover “policy implementation.

The industry observers said it was time insurers should in their periodic meetings with the regulator draw the Commissioner’s attention to what the insurance brokers are doing with “No premium No cover” policy to get the commissioner call them to order.