Wages of Poor Enforcement of Compulsory Insurance

Violation of laws on compulsory Insurances in Nigeria and government’s insensitivity towards the enforcements has spelt untold hardships and untimely deaths to many Nigerians, writes Ebere Nwoji

The National Insurance Commission (NAICOM), five years back (January 2017) highlighted enforcement of compulsory insurances nationwide as top issue in the list of its regulartory and supervisory priorities.

The commission, said it would do this through the launch of its medium term plan, the Market Development and Restructuring Initiative (MDRI).

Speaking during a media retreat organised by the commission, the Commissioner for Insurance, Mr Sunday Olorundare Thomas said, “The Commission will re-launch the Market Development and Restructuring Initiative (MDRI) with special and intensified implementation efforts on the following areas; Enforcement of Compulsory Insurance, diversification of distribution channels, increase in Access Points for Insurance Services, Micro Insurance among others.”

It is now exactly five years since the commission made this pronouncement but a critical look at the performance of the compulsory insurances shows that not much has been done by the commission in this all important area of enforcement.

Compulsory insurances are those insurances that are made mandatory by law. In Nigeria, they include Motor Third Party Insurance meant to ensure the safety of Third Party road users; the government has made it compulsory for citizens and residents to have motor insurance before plying public roads.

Employee Group Life Insurance

The employee group life insurance law requires every employer of labour with five or more employees to take out a life insurance policy on each of the employees at least three times the annual total emolument of the employee in both the private and public sectors.

In the same vein, the Health Care Professional Indemnity requires every licenced health care provider to obtain insurance before treating a patient. Health care professionals are required to obtain insurance that will protect their patients in case of accidents or fatalities resulting from professional negligence. A health care provider comprises any registered government or private healthcare practitioner, hospital or maternity centre.

Insurance of Public building which law requires that every public building must be insured against liability in the case of loss, damage to property, death or bodily injury that may be caused by collapse, fire, earthquake, storm or flood. It described building as any building accessible to people for educational, medical, recreational or commercial purposes.

Insurance of Buildings under Construction

This requires owners or contractor of any building under construction with more than two floors, to undertake insurance from the construction stage. The purpose is to guard the public against construction risks that may be caused by negligence on the part of the contractor; resulting in bodily injury, loss of life or property damage.

The Aviation Third Party Insurance and Marine cargo insurance are also among these compulsory insurances but NAICOM in 2008, slated the first five insurances mentioned above for launch and implementation.

Checks by THISDAY on the performance of these compulsory insurance policies shows that at the moment, proper implementation of these compulsory insurances has hit a rock while the public has suffered much exposure to the various risks they are meant to cover.

The only policy that enjoyed reasonable level of implementation was the Motor Third Party Insurance which through the Nigeria Insurers Association’s Nigeria Insurance Industry Data base (NIID) initiative is currently making waves in many states especially Lagos and Oyo States where the activities of fakers of the policy certificate have been reduced to the barest minimum and motorist now willing to get their cover from genuine operators.

Aside these, implementation of the other four compulsory insurances has not seen the light of the day but occurrences of the various risks they were meant to cover seem to be on the rise. The worst hit in this regard is the compulsory building insurance which builders have refused to embrace whereas cases of building collapses abound in different parts of the country.

The erstwhile Commissioner for Insurance, Mr. Fola Daniel, during whose tenure the compulsory insurance of public building and building under construction campaign was flagged off, listed structures covered under the Act to include: all buildings occupied by government ministries; extra-ministerial departments; statutory bodies; tenement houses; hostels; and any building to which members of the public have access for the purpose of obtaining educational or medical service or for recreational purposes or for business transactions.

Expectation and Policy performance

During the launch, which took place in Abuja, the insurance industry operators who were highly elated projected that the builders insurance, if well implemented as planned by the commission would yield a minimum of N10 billion premium to the industry annually.

Their hopes in this regard became higher when in the same year; state governments started enacting compulsory builders insurance in their various states. The Lagos State government followed by the Imo State government among others led the states.

To further boost activities in the industry through this particular policy, the federal government shortly after the launch approved NAICOM’s recommendation to make possession of compulsory builders insurance certificate a pre- requisite for getting government contract.

But 10 years after, THISDAY checks showed that Nigerian builders are far from embracing and compliance with the compulsory builders’ insurance law.

From available evidence, the policy has performed much more below insurers’ expectation.

It will be recalled that Daniel shortly after the launch had said that the transformation of the insurance industry into a trillion Naira market, a major dream of the industry from the then annual premium income of N300billion was based on the assumption that if all the houses and motor vehicles in Lagos and Abuja alone were insured, the figure would be met.

But a close look at where the industry is today, premium income wise shows that it is still far from meeting the target mainly because though the motor insurance through the Nigeria Insurance Industry Data base (NIID) has yielded substantial premium to the industry, the builders insurance yields fall below expectation mainly due to lack of enforcement.

As at December 2020, the industry’s annual premium income was still below N600 billion.

Builders’ insurance

Section 64 of insurance act of 2003 makes mandatory the insurance of buildings under construction where more than two floors are envisaged. The section says that insurance must cover the liability of the owner of the building in respect of the negligence of his servants, agents or consultant.

Section 65 of the same act makes the insurance of public building mandatory.

Public buildings are defined in Section 65(2) of the Act as all buildings occupied by government ministries; extra-ministerial departments; statutory bodies; tenement houses; hostels; lodges; or licences and any building to which members of the public have access for the purpose of obtaining educational or medical service or for recreational purposes or for business transaction.

Section 65 (4) of the act specifies that 0.25% of the premium collected is to be paid into a Fire Services Maintenance Fund to be administered and disbursed by NAICOM for the purpose of providing grants or procurement of equipment to institutions engaged in fire fighting services in the country.

The act also provides that where there is a violation of this order which derives from the provision of Sections 64 and 65 of the Insurance Act 2003, such offenders are liable to three years imprisonment or a fine of N250,000 or both.

Also, the law prescribes a fine of N100, 000 for a tenant or owner of such insured building in respect of loss of, or damage to property or bodily injury or death suffered by any user of the premises and third party.

Non-enforcement of policy

But despite these laws and determination by the insurance regulator to enforce the builders insurance, patronage of the policy and compliance with the law has been on a very low key.

This has compelled NAICOM to solicit for support of government in enforcement of builders insurance.
Apparently, non-enforcement of the policy has not only affected insurance industry but other allied agencies of government whose services aid insurance such as the fire service.

At a recent forum of insurance brokers in Lagos where the Federal Fire service Department was invited as special guest, the agency was surprised to learn that 0.25 percent of premium from compulsory builders insurance was to go to them to enable them equip their workers for their fighting job.

At one of the Insurance conferences in Abuja, when the issue of compulsory builders insurance came up with its expected aid to the fire service from the premium, a former commissioner for insurance said the service has not received aid from insurers in this regard because no account has been opened to that effect as directed by the law.

The underwriters themselves said not much premium has been realised from the policy.

At the conference, the insurers agreed that government and its relevant law enforcement agencies should help the industry in the enforcement of the policy while the industry should seek for alliance and cooperation from the agencies and help in buying some of their equipment.

The insurers want all hands to be on the deck in the enforcement of the builders insurance arguing that the policy, if patronised will not only save lives and properties in the country but would position insurance to play its role in the economy.

They said the federal government itself should be at the vanguard of this by getting its law enforcement agents to not only enforce the purchase of the policy but arrest and deal decisively with owners of collapsed building in different parts of the country, especially if such buildings lack insurance cover.

Insurance industry analysts said government need to stand up on the enforcement of the compulsory builders insurance because of incessant collapse of building in the country.

According to them, a situation where a building collapsed, killing scores of people and law enforcement agency like the police waited for a whole day before going there, thereby allowing the owner to escape will create room for carefree attitude among Nigerians regarding patronage of the policy.

They also said the section of insurance Act 2003 that talks about supporting fire service command with part of insurers’ premium should be implemented to the last to enable fire service men be handing in fighting fire out breaks in homes and in markets.

According to the analysts, this will solve the problem of excuses of lack of water; break down of fire fighting vehicles often given by the fire service men when their services are needed.

The analysts believe that implementation of the compulsory builders insurance will not only help in the area of claims payment to victims of collapsed building dependants but will also act as prevention against building collapse as no insurance practitioner will want to give cover to any building which standard is questionable.
They reasoned that implementing the policy and enforcing its compulsion will compel builders to comply with the stipulated standard which is prerequisite for providing cover by any insurance firm.

BUILDERS’ VIEW

But an estate developer in Ojo area of Lagos, Joe Orakwue who spoke on the need for builders to embrace the policy said the policy is mere money making venture for insurance underwriters.

He said what is more important is government enforcing the use of standard building material in construction.
According to him this is basic because prevention is better than cure.

He said for him, what people should be talking about is how to prevent building collapses so that lives will not be lost and not how to pay compensation for dead people because no amount of compensation paid to the family of the deceased will bring the dead back to life.

He said as a builder, he ensures that all buildings he handles are of right standard adding that when this is the case, there is no need for insurance, as the building would stand the test of time.

INSURANCE MARKETERS’ EXPERIENCE

When THISDAY approached those who sell insurance and have direct contact with the insuring public to ascertain the feelings of people they market the compulsory insurances especial builders insurance to, the marketers, mainly members of the Association of Registered Insurance Agents of Nigeria (ARIAN) confirmed that many public buildings in Nigeria were not insured, adding that this is so whereas the law says that they must be insured.

According to them, most hotels in Abuja as well as schools are not insured and they fall under the public building category.

One of the marketers, Sandra Nwachukwu, observed that there is huge potential for building insurance in the country but that the government needs to help.

On what insurers expect government to do in the enforcement of the builders insurance
She suggested that government should support insurers in enforcing the policy by sealing up premises of uninsured public buildings and attaching huge fines to be paid by the owners before reopening.

She said in doing this, government would be helping the masses and not the insurers as some people may think.
President of the Chartered Insurance Institute of Nigeria (CIIN) and Chairman, Insurance Industry Consultative Council (IICC), Sir. Muftau Oyegunle, speaking on enforcement of all compulsory insurances shortly after the collapse of Ikoyi building, which killed no less than 45 people called on federal government to make health Insurance compulsory in Nigeria.

He said the federal government could achieve this by subsidising the premium paid by Nigerians on the policy.

He noted that this has been done successfully in other countries therefore is achievable in Nigeria.

On the compulsory insurance for buildings up to two floors under construction which if implemented would have compensated victim of the menace, he explained that all insurance laws were federal government ‘s laws and should be enforced by government.

“The state government has to domesticate and implement it. After they have domesticated it, when it comes to fines and penalties, the state government has the liberty to decide how to do it in their state. They can go above the stipulated fine but cannot go below it. So we have to understand the way we operate and how to make things happen, ”he explained.

The IICC chairman however commended the Lagos State Government for playing a leading role in the adoption of insurance.

“I commend Lagos State Government, of all the states, Lagos is even ahead because some states don’t even know what is going on but Lagos state domesticated and enforced it “ he said.

But while builders in different parts of the country continue to ignore the compulsory builders insurance, cases of collapsed buildings have continued to rise and in each case of uninsured building collapse, the victims are left on their own except in situations where state government decides to extend helping hand to them through little financial help.

Aside the recent 21 storey building collapse in Ikoyi Lagos late last year, which was the most recent, others happened in the past killing unsuspecting Nigerians.

Industry analysts said the case did not start in recent years.

According to them, in the past 15 to 20 years, cases of collapsed buildings and their attendant waste of lives abound in different parts of the country.

They noted that in 2006, up to 3 building collapses were recorded in Lagos killing some occupants because of poor building and construction standard as well as poor materials.

“Precisely On March 22,2006, the top nine stories of a 21-storey Nigeria Industrial Development Bank building collapsed in Lagos. This happened after a fire had gutted two stories in the building earlier that month. Heavy winds during a thunderstorm caused the building to cave in from the structural weakness after the fire.

“One person was killed in the incident while 24 were reported injured. In July the same year, a four-storey block of flats collapsed in Lagos, killing at least 25 people. There was evidence by construction experts that the incident was caused by poor construction. The building was under three years old. In November the same year, an unfinished, three-storey building still under construction collapsed. Two construction workers were killed while twelve people were saved with minor injuries.” Said the analysts in their report on building collapses nationwide.

SEARCH FOR SOLUTION:

Against this backdrop, the insurers said they are in earnest search of ways to promote patronage of the builders insurance so that not only that their premium income will increase, also victims of the incidents will have compensation.

But the insurers appear to be helpless in this effort because of lack of government support.

A former president of Nigerian Council of Registered Insurance Brokers (NCRIM), Mr Ayodapo Shoderu, had during his tenure said that the council would embark on lobby of state House of Assembly to promulgate edicts that would drive public compliance with some of the provisions of the insurance products covered under the insurance law.

Shoderu who stated this at a press briefing in Lagos noted that the spate of public building collapses and the consequential human and material losses usually recorded all over the country would reduce considerably if states’ legislature have in place laws compelling adherence to section 64 and 65 of the insurance act.

He said that the NCRIB under his tenure would focus more attention on enforcement of builders insurance but after his proposal, his two-year tenure focused more attention on insurance awareness among Nigerians.

Various regimes in the insurers’ trade groups tried their best to implement the enforcement even NAICOM but to no effect mainly because there has not been strong government backing.

This in the view of analysts has spelt the need for government to take the lead on the enforcement of not only the builders insurance but also all the compulsory insurances including professional indemnity health insurance, compulsory Group Life Insurance and others.