Minister of State for Finance, Dr. Yerima Ngama
The Federal Government has vowed to sanction any ministry, department and agency (MDA) of government which continues to fail to remit its insurance premium to insurance companies providing cover for their assets and operations.
The Ministry of Finance, which issued the threat in a circular dated February 12, 2013 and addressed to directors-general/chief executives of parastatals, agencies and government-owned companies, disclosed that the total premium debts owed the insurance companies by MDAs as at January 2012 was N24 billion, in spite of yearly budgetary provisions for insurance.
The circular titled: ‘Guidelines on Insurance Premium Collection and Remittances- Compliance with Section 50(1) of the Insurance Act’, was also sent to Chief of Staff to the President, Secretary to the Government of Federation, Ministers/Ministers of State , Head of Civil Service of the Federation, and the Governor of the Central Bank of Nigeria (CBN), amongst others.
The ministry in the circular signed by the Minister of State for Finance, Dr. Yerima Ngama, stated that non-compliance by the MDAs and others, had weakened the ability of insurance companies to meet their various claims obligations under contracts of insurance, to eligible beneficiaries.
“Consequently, MDAs and other stakeholders are by the circular directed and advised to comply with the provisions of the above Act, as any MDA/organisation found culpable would be sanctioned accordingly. To this end, all MDAs and other stakeholders are enjoined to render their returns on premium collection and remittances to the National Insurance Commission (NAICOM) as enshrined in the guidelines,” the ministry added.
The ministry further stated: “In addition, it is worthwhile to note that henceforth, any contract of insurance entered into without payment of full premium in advance shall be legally unenforceable. It is expected that the enforcement of this provision of the law will strengthen insurance companies’ ability to meet claims obligations under contract of insurance.”
The Commissioner for Insurance, Mr. Fola Daniel, had recently lamented that the menace of unpaid premium had impacted negatively on the fortunes and survival of the insurance industry.
He had observed: “The vexed issue of delayed or unpaid insurance premium has now attained an alarming crescendo, threatening to drive the industry into extinction if not curbed”.
According to him, most insurance companies made huge provisions for outstanding premiums in their books on an annual basis, “which invariably affect their bottom-line and thus, their inability to make profit, pay dividends to shareholders and attract investments to enable growth.”