Apathy Towards Builders’ Insurance

Six months after NAICOM’s National Insurance Conference, which was supposed to kick off the implementation of the compulsory builders insurance nationwide, operators are yet to see the desired change, writes Ebere Nwoji

The 2023 National Insurance Conference with the theme, “Redefining Safety-Insurance Solutions for Public Buildings and Buildings under Construction,” was no doubt part of  National Insurance Commission’s (NAICOM) effort to drive the implementation and enforcement of compulsory insurances in Nigeria especially the insurance of public building and building under construction .

The conference which  held between October 22 to 24,2023 was expected to open a new chapter on  enforcement  of the laws on compulsory building insurance in Nigeria.

But insurance marketers who spoke to THISDAY  on the performance of the policy  after the conference said they are still expecting the much desired change of attitude from the insuring public in the area of patronage of the policy.

Industry watchers said the onerous was on NAICOM  to embark on evaluation of public response to determine whether there has been change in public attitude towards the policy as well as level  of cooperation by the law enforcement agents whom the commission extended an olive hand of collaboration after the conference.

According to them, it is only when this is done that the commission would be in a better position to rate the achievement of the conference to determine the next line of action in the enforcement of compulsory insurance.

Industry observers said this has become necessary for two reasons. First, so that efforts made by the commission in organising the conference and anchoring it on the  policy implementation will not be in vain just as it was in 2010, when the commission organised campaign on public launch and implementation of the policy.

Secondly, the rainy season when cases of collapsed buildings abound in different parts of the country is approaching.

Proper implementation of the policy will not only provide succor to the victims of building collapse but would help to checkmate use of substandard building materials in building construction in Nigeria.

This they said was because insurance companies would require approved building plan for houses they will insure and this will leave owners of such buildings with no other choice than to build their houses to standard.

Enforcement of the six compulsory insurances enshrined in the 2003 insurance Act has remained one of the greatest challenges NAICOM is facing in discharging its regulatory duties as well as its role as the federal government adviser on insurance matters.

Part of the reason is because apart from Nigerians’ indifference to insurance, the commission has not enjoyed full support of government agencies especially law enforcement agents in the enforcement of these compulsory insurances.

The result is that several efforts by the commission to get Nigerians buy into compliance with the compulsory insurance laws through sensitisation and awareness creation have  failed to yield the desired result.

Previous efforts

These efforts get it done dates  back to the tenure of Mr Fola Daniel who in the year 2010 launched the implementation of the six compulsory insurances in Nigeria.

During the launch 14 years ago, the insurers had projected that if the insurance on public building and building under construction would be effectively  implemented, cases of collapsed buildings in Nigeria would abate because insurers underwriting each house to be insured would demand for approved and certified structural  plan before underwriting such building.

They also said as at that time when Naira exchange rate to dollar was less than N150,  effective implementation of the building insurance would  generate over N10 billion  annual premium for the industry.

Unfortunately, 14  years down the line, the industry is still battling with enforcement of building insurance with little or no success while cases of collapsed buildings abound in different parts of the country. Also, incidences  of fire outbreaks in shops and markets across the country did not cease.

Apparently, it was against this backdrop that NAICOM in its maiden edition of the National Insurance Conference anchored the theme on, “Redefining Safety – Insurance Solutions for Public Buildings and Buildings under Construction,” with President Bola Ahmed Tinubu as special Guest of Honour and Babajide Sanwo -Olu as guest speaker.

The  commission no doubt was determined to closely draw the attention of government at all levels to the urgent need for implementing and enforcing the law on compulsory building insurance.

Going by the provisions of the Insurance Act 2003, Public buildings includes;  “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 Act further makes it mandatory that, “every public building shall be insured with a registered insurer against the hazards of collapse, fire, earthquake, storm and flood.”

NAICOM Considerations

NAICOM, as the regulator of insurance, is certainly mindful of the colossal wastes and losses in terms of human lives and hard earned resources, incurred annually through building collapses, fire and  natural disasters which more often than not, involve public buildings. The collosal losses which runs into billions of naira, are often due  to either non-insurance of such public buildings or non-compliance to insurance policy contract terms by the insured.

These losses and wastes are even more devastating to victims of collapsed public buildings or those gutted by fire located at the three tiers of government without the relevant insurance coverage. The search for the best means to adequately indemnify victims, no doubt informed the resolve of NAICOM to classify public buildings under compulsory insurance to guarantee indemnity, compensation, minimise losses and wastage in any event of occurrence of the risks insured against. Regrettably, experts  said only about 5000 public buildings in Nigeria  have appropriate insurance policy cover. More worrisome, is the fact that premium on the few insured public buildings are not paid as required, despite the no premium no cover  law.

The result is that in event of the uncertainty insured against, the victims are often  left to their fate by the insurer due to breach of the policy contract.

Insurance Commissioner’s Target

The Commisioner for Insurance, Sunday Thomas while speaking at the conference said the effort was targeted at not merely discussing  but to usher in a new era of collaboration, one where insights are transformed into actionable strategies that redefine safety standards.

Thomas  was very optimistic that the ideas and suggestions generated at the conference would  be of immense relevance in shaping the future of insurance and stimulating socioeconomic development in Nigeria.  “Insurance is a key driver for economic growth and as NAICOM we continue to seek collaborative ways to grow the sector and enforce the critical and compulsory insurance policies. From financial inclusion to new products development and market expansion, we believe insurance will accelerate Nigeria’s infrastructural and national development,” Thomas asserted.

He cited the alarming rate of building collapses in Nigeria, which, according to him, underscores the urgent necessity of implementing comprehensive insurance for public buildings and buildings under construction.

He said, “These two types of insurance are part of the compulsory insurance policies of NAICOM, that give succor to our people in the event of a building collapse or the occurrence of other risk factors.

“So, as a nation, as landlords and building owners, as project managers and site builders, and users and workers within public buildings, we need to start taking these two insurance policies very seriously – The Public Building Insurance and the Insurance of Building under Construction. They can provide financial protection against such unforeseen disasters, enabling swift recovery, reconstruction, and the restoration of critical services. By insuring public buildings, Nigeria can safeguard its infrastructure investments, ensure the continuity of essential services, and promote a safer, more resilient environment for its citizens.”

 Insurance Act 2003  provisions

The Insurance Act 2003, Part XI Insurance of Property, Sections 64 to 66, explicitly provided as follows: Insurance of building under construction. (1) 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. (2) The duty to insure under subsection (1) of this section shall arise when a building is under construction. (3) A person who contravenes sub-section (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, sub section 1 of the Act states that every public building shall be insured with a registered insurer against the hazards of collapse, fire, earthquake, storm and flood.  Sub section 2 says Public building”, in this section includes 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. 

Sub section 3 says the  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. 

Sub section 4 says 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 Commission for the purpose of providing grant or equipment to institutions engaged in fire fighting services. 

Section 5 says any insurer who defaults in making payment as required under sub-section (4) of this section commits an offence and is liable on conviction to a fine 10 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. 

Sub-section 6 says, an  occupier or owner of premises who is in default of this section commits an offence and is liable on conviction to a fine of not more than N100,000 or to imprisonment  for one year or both. 

Sub section 7 of the same section 65 says a  person who intends to insure any other property located in Nigeria, whether movable or immovable, or any insurable interest or liability in relation thereto, shall place such an insurance with all insurers registered in accordance with this Act who may, subject to the provisions of this Act, reinsure such property or liability overseas where the Nigerian insurance industry lacks the capacity to retain the risk. Just as sub section 8 says that a person who contravenes the provision of subsection (7) of this section commits an offence and is liable on conviction to a fine equivalent to ten times the amount of premium paid in respect of the policy. 

Present situation 

Despite the  provisions of the law, experts said only 5000 public buildings in the country have insurance cover including the high rising buildings under construction.

Findings by THISDAY showed that the situation has not changed even at present mainly due to lack of enforcement.

There had been rampant building collapses in the country  just as there have been  incidents of fire outbreaks in public buildings.  Most of these buildings have no insurance cover and their victims left to their own fate. A case in point was  the collapse of 21 storey building in Gerard Road Ikoyi Lagos,  in 2021 in which more than 21 people were  declared dead and many injured. Till date no insurance firm in Nigeria or a foreign insurer has admitted that it insured the building.

The situation was worsened by the fact that the owner of the building and site managers who should be in position to give information on the insurance status of the collapsed building were said to be among the victims.

Statistics provided by the  Building Collapse Prevention Guild (BCPG) in August last  year, showed that Nigeria witnessed a total of 553 building collapses between 1974 and ending of April 13, 2023. Also, it showed that  Lagos, the commercial hub of Nigeria led with over 326 buildings collapse in the last 49 years. This translates into Lagos accounting for 59.05 percent of the total 553 collapsed buildings within the time under review. The year 2022 was  regarded as period with the highest number of collapsed buildings for having had 62 nationwide with Lagos accounting for 20 cases.

As this year’s rainy season approaches, NAICOM is faced with the challenge of weighing the impact of the conference on implementation and patronage of the compulsory building insurance.

Analysts said until the commission determines that there has been positive change in patronage of the compulsory builders insurance the commission should not rest on its oars.