Group Life Insurance: Who Will Bell the Cat?


With a few days to the end of the year 2016, the federal government is yet to release N5.4 billion for the payment of group life insurance premiums for its workers, throwing up the question as to who is causing the delay, writes Ebere Nwoji

The delay, by the federal government, to release the N5.4billion budgeted for the payment of group life insurance premium for its workers in 2016, is a source of worry to the insurance industry as recently pointed out by the chairman, Nigeria Insurers Association, (NIA) Eddie Efekoha.
NIA is the umbrella body of insurance underwriters in Nigeria.

Indeed, the delay, not only distorts the industry’s business plans, programmes and activities for the 2016 fiscal year especially in the face of the ‘no premium no cover’ regime, it also goes contrary to government’s promise of leading by good example in payment of premium for Insurances of its assets and life cover for its work force.
The most disturbing part of it is that this delay is fast becoming the culture of the government as every year, instead of renewing contract with insurance firms concerned in January, the government will wait until last quarter of the year and when it pays, it may pay partly, leaving the other part hanging.

In the course of the delay, some workers whose families were supposed to benefit from the compulsory group life insurance policy, lose their lives, raising the question on how government settles such defendants.
Indeed, this same nonchalant attitude over employees’ welfare especially in the group life insurance arrangement, is not only displayed by government but also private sector employers.
But why government’s case is worrisome to the industry is because the industry looks upon the same government for the enforcement of the compulsory insurances.

Findings by THISDAY on the causes of the delay to renew the policy for the year which expired since July, showed that bureaucratic bottlenecks and power tussle between the office of Head of Civil Service of the Federation and the National Insurance Commission ( NAICOM) was the main cause of the delay.

Section 4 (5), of the Pension Reform Act, 2014 states that “Every employer shall maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.
But in the case of federal government workers, the group life insurance contract for the year expired since July and since then, agitations have been raging over its renewal by the general public while the media have been probing the reason for the delay.

According to THISDAY’s findings, the renewal had to go through processes, first, the certification of the underwriters by the Bureau of Public Procurement (BPP), second, the approval by President Muhammadu Buhari and lastly, request for release of funds by the Federal Ministry of Finance.

According to a source close to the office of Head of service of the federation, the BPP, had certified 20 out of 21 insurance companies forwarded to it for the underwriting of the Group Life Insurance renewal of the civil servants, adding that though they had also written to NAICOM for confirmation but till date, NAICOM has not responded.
He however, maintained that the Head of Service had no option than to go ahead with the list already certified by the BPP, which also were among the companies that NAICOM had already published in a newspaper advert as having been licensed by the commission.

Furthermore, he stated that though the Head of Service has commenced processes for the renewal of insurance of federal government assets, it has decided to conclude that of the Group Life Insurance in order not to over burden the government with so many requests for funds.

According to the source, there is no other problem regarding the policy renewal but government is just going through some processes.
He recalled that in February, this year, government published an advert inviting insurance practitioners to apply and that took six weeks. After six weeks submission, it took government some time to process all their papers and after it had shortlisted those it wanted, it needed certificate of no objection from the Bureau of Public Procurement.

“After the response was received, we had to write to Mr. President for approval. So, since the day we got that approval from Mr. President, we’ve continued with the processes of making sure that the perfect thing is done before we present to the Ministry of finance for payment. There is money for it, it is in the appropriation and nobody had told us that there is no money to pay for it.

“It is usually N5.4 billion annually for civil servants. That’s the figure and that had been recurring for the last three or four years. For this current one, I think we shortlisted 21 insurance companies and BPP gave us certificate of no objection for 20. And we can only work with those approved by the BPP and that approval has been confirmed by Mr. President, said the source.”

On the relationship between the office of the Head of Service and the NAICOM, he maintained that the role of NAICOM begins and ends in advisory capacity as the apex regulator of the insurance sector and adviser to the government agencies on insurance matters.

He explained that though NAICOM could advise it, it is not bound to accept such advice as long as the processes of engaging under writers were in tandem with the law.

“NAICOM is regulating the industry. That is the insurance companies, the underwriters and brokers. They are the one registering them, they are the one giving them their licenses and they only act as adviser to the government agencies like the Head of Service. Their role ends with advisory. As long as we make sure that those we are using are those licensed by NAICOM, we think we have done due deligience. And they cannot and will not say that we have not consulted them.”

Speaking further, he said when somebody is acting as an adviser, there is a limit to the advice. “If you’re my adviser, you can give me some advice and I can take or leave the advice. It is my responsibility to make sure that I act in tandem with the law. The office of the Head of Service is aware of the law and we are applying that to the letter.

He said government, has engaged the highest authority of NAICOM and they cannot deny that, adding, ’ “our day to day running of that program, I don’t think that anybody or any law said that we should leave that to NAICOM to do for us. If that is their expectation, I’m sorry I don’t share that view.”

But recently, at his maiden press briefing in Lagos, the NIA chairman, Eddie Efekoha, had expressed worry over the issue saying that both parties should remember that it is money meant for the industry that is being held bound.
He advised the two parties to take the right steps that will ensure fast release of the money to the benefit of both the industry and the workers.

Also industry stakeholders are of the view that as industry regulator and government adviser on insurance, NAICOM is in the best position not to dictate but to guide government on the best approach to the group life insurance and from feelers, NAICOM wished government could speed up action in the release of the fund.

This being the case, the stakeholders are of the view that the office of Head of service, should at this time let go every claim of power and supremacy and rub minds with NAICOM to persuade ministry of finance to release the money and should ensure that families of workers who lost their lives within the period the fund for the premium was not released are adequately compensated.

Section 4 (5), of the Pension Reform Act, 2014 states that “Every employer shall maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.

But in the case of federal government workers, the group life insurance contract for the year expired since July and since then, agitations have been raging over its renewal by the general public while the media has been probing the reason for the delay.

The Group Life Insurance is one of the compulsory insurance policies slated for enforcement by the National Insurance Commission under its Market Development and Restructuring initiative (MDRI).

Among all other compulsory insurances, the group life insurance seems to hold a lot for Nigerians from all walks of life because it is the last hope for the Nigerian workers and their families. As such, much hope is placed on this particular policy by both the workers, the pension industry that established it and the insurers who administer the policy.

To the average Nigerian worker, the group life insurance stands as the last resort for his dependants when he is no longer there as the breadwinner of the family to provide new hope for the family.

To the insurers, premium from the group life insurance is looked upon as a major boost to the annual premium income of insurance firms.

Little wonder why insurers scramble for government group life policy as if it is the end of life and even go as far as engaging in price wars and rate cutting if only to grab their own portion of the business.

But as important as this particular policy is, it has suffered worse abuse even more than the third party motor insurance. This is so because the workers for whom it is meant for are totally ignorance of their rights in the group life policy while the employers who suppose to patronise the policy are totally unwilling to include it as one of the benefits to be enjoyed by their employees.

The situation is worsened by the fact that the policy falls in between the insurers and the pension fund managers therefore argument on whose responsibility it is to enforce it among the operators also causes the deal but the pathetic thing is that the workers who are totally ignorance of their rights in this regard are at the receiving end.

A former chairman of Pension Fund Operators of Nigeria (PenOp), Misbahu Yola had lamented that the failure of insurers to release proceed from group life policy and unwillingness of some employers to pressurise insurers to release the benefits often constitute problem to payment of benefit to families of deceased employees, this goes to explain that the delay by government to release premium on the group life insurance for its workers also affects payment of their retirement benefits by their Pension Fund Managers.

Also the former Commissioner for insurance, Mr. Fola Daniel, once told journalists that the group life insurance is a product of pension industry therefore it is not the duty of insurers to enforce it but that of National Pension Commission.

Though he later said that both PenCom and NAICOM would design collaborative effort at enforcement, the issue of whose core duty it is to enforce the group life insurance has remained a major setback to its implementation.
THISDAY, recalls that PenCom had at one time or the other, set up some recovery agents to monitor and recover funds from employers that are withholding employees’ contributory pension fund but nobody has thought of how to compel employers to institute the group life insurance for their employees.

The result of this is that Nigerian workers have been left at the mercy of their employers especially the private sector employers who obviously do not want to hear about the group life insurance scheme.

Indeed, many see it as extra and unnecessary expenses to their organisation and bogus condition of service.
The result is that right now, only the government and few non-governmental organisations obey the group life law, throwing up the question as to who should act on behalf of the helpless workers to secure their right on the policy.

Few years back, federal government, had stated its resolve to strengthen the Group Life Insurance Scheme in order to make it more effective and achieve the desired objectives.
The then Head of the Civil Service of the Federation, Alhaji Bukar Goni Aji, gave this promise when he declared open a three-day seminar for desk officers of the scheme from all the Ministries, Departments and Agencies of the Federal Government in Minna, Niger State.

Although government was silent on the issue of making the group life insurance scheme more effective through the conferment of necessary punitive powers on the National Insurance Commission (NAICOM) as demanded by insurance managers, the time is ripe to enforce this particular policy.

From available records, only federal government complies with the scheme with some lapses observed in its implementation as is seen in the current delay in the release of the funds for this year. Other lapses in implementing the policy include undertaking the risks which in turn delays settlement of claims to deceased families when claims occur, undervalue of premium payable on the scheme by the insurers themselves.

Although in recent years, insurers had rolled out their drum in celeberation of success so far recorded in the collection of group life premium from government in the face of ‘no premium no cover policy, the delay to release the premium this year up to December, shows that government is again slacking in payment of the premium.

There are indications that sometimes, money to pay the premium will be released but government officials in charge of insurance will keep such huge funds in their accounts for interest to be accumulated for them before they will pay it.
Observers have feared that in the face of ‘no premium no cover’ being implemented by the National Insurance commission, such act may backfire in the event of risk in form of death or disability of any of the beneficiary employees as insurance firms will not listen to any excuses.

This being the case, insurers should not sit tight looking at the money meant for their business lying idle somewhere, they should stand up, disturb government to pay the premium making use of their lobby team.
Expressing concern about the series of unethical practices in the administration of group life insurance, former President of Nigeria council of Registered Insurance Brokers (NCRIB), Mrs. Laide Osijo, said though government has cleared previous years’ bill, the outstanding premium for 2016 is unhealthy for the insurance industry.
She said: “I want to appeal to the Federal Government for the release of premium on group life for the year 2016 as it stands, no premium has been paid for the policy this year.

“This situation has made many insurance companies to discountenance claims under the year in review of the now existent ‘No premium no cover.’ This, as we are all aware, is to the displeasure of some beneficiaries especially to those who died in active service. The impression many of them have is that the insurance industry is insensitive to their plights, a situation that creates serious image smear for the industry.” Osijo said.

The Group Life Assurance Scheme is a statutory creation by virtue of Section 9(3) of the Pension Reform Act, 2004 which requires that all employers of not less than five employees must maintain life assurance policy in favour of each employee for a minimum of three times of the employee’s emolument per annum. The Scheme provides that, in the event of death of any serving officer, his or her next of kin would be given a relief equivalent to three times the annual total emoluments of the deceased, in addition to the normal entitlement of the deceased officer after service.

But aside federal government employees and few others working with big corporate organisations, no Nigerian worker can boast of having been assured by his employer of adequate arrangement for group life insurance by his employer.
The employers are riding on the ignorance of their employees on their right in this regard to deny them of the group life insurance entitlement. Findings by THISDAY showed that because many employees and their dependents are ignorance of their right in group life assurance, where an employee of an organisation dies in active service, the best the organisation does is to deep hand in the pocket and give any small amount of money to the dependents .The amount could be as small as N100,000 or N50,000 after which the dependants will not make any effort to demand for the deceased’s group life insurance right.

For employees with permanent disability, many, because of their ignorance, do not request for it whereas such workers do not have money to take care of themselves or pay their hospital bills for the injury. In some situations, the best the organisation does is to settle their hospital bill for the injury and leave the employee to his fate for the rest of his life.

This has been affecting not only the employees but the insurance industry negatively.
Former Managing Director Royal Exchange Assurance Mr. Moukwunye lamenting on the negative effect on insurers said the insurance industry is losing a lot from non enforcement of the group life insurance scheme. For him, no effort is being made to enforce the scheme; as a result, the employers are having their way at the expense of the employees and the insurance industry.

He narrated his experience during one of his visits with his team to an Ikeja based manufacturing firm in search of group life insurance business. According to him the moment he mentioned the need for group life insurance arrangement for the staff of the manufacturing firm, the admin manager frowned his face asking him whether he has come to put the organisation into trouble and quickly answered “we don’t do that here please.”
According to him, when he pressed further, he was told that the company has made arrangement with some insurance companies for their managers.

Arguing that the pension Reform Act 2004, which established the group life insurance scheme for workers did not make it the exclusive of managers, Moukwunye called on the federal government to ensure proper enforcement of the group life insurance scheme to close leakages currently being suffered by insurers and give Nigerian workers better hope.

On its part, the industry regulatory authority, NAICOM, said the decree setting it up did not confer it with necessary enforcement and punitive powers.
NAICOM said it has no power to go round and shut down businesses that failed to put in place adequate group life insurance for its workers. The commission, however said when the new insurance act is signed into law, such problem will be addressed.