Recent increase in premium on motor insurance coincides with 10-year anniversary of the Nigeria Insurance Industry Data base (NIID). In this report, Ebere Nwoji looks at the effects of the new motor Insurance premium on the industry operators’ plans to implement the NIID initiative in all the states of the federation.
As Nigeria Insurance Industry marks 10 years of the Nigeria Insurance Industry Data Base initiative (NIID), an information technology based system for facilitating easy collation and dissemination of statistical and other information relating to motor insurance policies, there is the big question on what impact the recent upward review of the compulsory Motor Third Party Insurance will have on the proposed implementation of the NIID initiative across the country.
Currently, NIID implementation is effective in Lagos, the Federal Capital Territory (FCT) and Oyo state while the insurers have billed to ensure its implementation in all states in Nigeria.
Indeed, analysts have raised the question on whether the recent upward adjustment on premium payable on motor insurance especially Motor Third Party Insurance would accelerate the spread of the initiative nation wide or shrink the huge success already recorded in some parts of the country.
According to them, the question came up because of the prevailing economic hardship faced by Nigerians and the public outcry on the new premium rate attached on motor insurance policies since inception on January 1, 2023.
Indeed, motorists in the country are not at ease with the new rate, which signifies 200 per cent increase from N5000 to N15000 for the compulsory Motor Third Party insurance and the mandate on underwriters not to go beyond 5 percent cost of vehicle for comprehensive motor insurance.
This is a major shift from the former regime, which has been on for over 20years until January 1, this year.
Insurers’ Attitude Before NIID
Under the former regime, insurers arbitrarily cut rate on Motor insurances. For the compulsory Motor Third party policy which has N5000 official premium rate attached and N1000,000 claims limit, insurers were collecting as low as N1,500 instead of the official N5000. Such operators do not pay claims when the risk crystalises. They rely on ignorance of the members of the public on benefits attached to the policy to have their way in many cases. This also paved way for fake license issuers at licensing offices and local government offices to defraud unsuspecting motorists who want to renew their vehicle licenses to buy fake certificates from them.
For the comprehensive motor insurance which is optional, the insurers play the same game as whereas insurance Act 2003 pegged the official rate at 10 per cent of the cost of the vehicles, insurers engage in rate cutting with some going as low as 2.5 percent hoping to repudiate the claims with one flimsy excuse or the other.
This practice has been there over the years even as the various law enforcement agents at check points were totally ignorance of the right thing motorists ought to do.
According to the statutory laws, vehicle insurance includes covers for cars, trucks and motorcycles.
Insurance Act 2003
The Insurance Act 2003 mandates all motorists to have a minimum of Motor Third Party insurance policy in place.
Section 68 of the 2003 Insurance Act says, “No person shall use or cause or permit any other person to use a motor vehicle on a road unless a liability which he may thereby incur in respect of damage to the property of third parties is insured with an insurer registered under this Act.”
It further explains that the insurance of this section shall cover liability of not less than N1m.
According to the Act, a person who contravenes the provisions of this section commits an offence and is liable on conviction to a fine of N250,000 or imprisonment for one year or both.
Not withstanding the extant laws in some parts of the country, motorists violet the law arbitrarily thus either driving their vehicles without any insurance cover for the third party road user or obtaining the insurance certificates from fake certificate sellers at lower rate just to pass police check points.
Attitude of Motorists
Recently, motorists in Kaduna openly said they would not renew their insurance papers in the state where official rates were charged by genuine insurance but operators but would go to neighbouring states where they could pay as low as N1000.
Even the revenue collectors in the state supported them by insisting that they will not support purchase of genuine insurance cover from genuine insurers at the rate of N5000 insisting that it is discouraging motorists from renewing their papers in the state thereby depriving them of revenue that ought to come to the state.
The result of all these is increase in number of accidents involving hit and run vehicles leaving the third party road user at his own fate.
But with the recent hike in the motor insurance by NAICOM, analysts wondered what impact this would have on the implementation of the NIID nation wide.
NAICOM’s Action
THISDAY checks reveal that not only did the regulator effected the increase, it also put in place checks and balances to block every escape route for insurers who would manipulate the system by collecting premium lower than the stipulated rate bearing in mind not to pay claims when it crystalises if only to sell his policy.
This the regulator, the National Insurance Commission (NAICOM) did by mandating all insurers to upload on NAICOM’s portal every motor insurance policy sold and uploaded in the NIID.
On the part of the motorists, the collaboration between the various law enforcement agents at checkpoints and the digitalisation of their system makes it possible for their cameras at checkpoints to capture every moving vehicle with fake document.
This situation according to analysts when compared to what happens in some states in the north where even at N5000 premium most motorists prefer to go to other states where they can get the motor insurance at N1,500 raised the big question on whether the new rate will accelerate the progress recorded by the NIID initiative in its ten years of operation or retard the expected spread in those states where both NAICOM and Nigerian Insurers Association are beaming their searchlight for making the NIID effective.
Operators’ Views
In their views, some insurers believe the new rate will not affect further implementation of the NIID in other states especially Motor Third Party insurance while some said it will definitely have negative effect.
According to the Executive Secretary Nigeria Council of Registered Insurance Brokers (NCRIB) Mr Tope Adaramola, the new rate will definitely affect the implementation of the NIID in the remaining states where it has not been implemented.
He said with the public outcry that greeted the new rate and the present economic reality on ground in the country motorists find it difficult to pay the new rate.
He said there are every likelihood that motorists would begin to cut corners especially in those states where the NIID has not been implemented.
He said because the NIID has not been working in those states and motorists don’t understand the workings and implication of buying from fake certificate sellers they will look for where to get the certificate at cheaper rates which is suitable for their public.
He said these set of motorists don’t even consider the corresponding increase in the claims or benefits on the policy as their major area of interest is how much premium they were required to pay.
He said the beauty of the NIID is that it brings all insured vehicle under insurance net while those with fake certificate will not be captured.
He said to guard against mass drift of motorists to fake certificate sellers, the industry as a team should guard against cutting corners in the new rate.
The insurers through their umbrella body NIA should join hands with regulator in the present push for enlightenment of the masses on the need to buy their insurance from genuine insurers and on their own determine not to engage in rate cutting.
He said they should through the enlightenment direct the attention of the people to the corresponding increase on claims limit from N1000,000 to N3000,000.
He however observed the effective implementation of the NIID is still restricted to some parts of the country noting that the current premium increase and the bid to implement NIID in such areas of the country would look like throwing stone in a mighty ocean.
He noted that NAICOM has started the education, enlightenment of the public adding that it should be made realistic and strategic while the entire industry should join hands.
For the NCRIB Adaramola said the council has always taken responsibility in this kind of situation.
He said motor insurance constitute between 60 to 70 percent of businesses brought to the underwriters by brokers annually.
He said this being the case, the brokers have take it as their responsibility to educate the masses
On why they should positively minded in the new rate.
Managing Director Afriglobal Insurance, Mr Casmir Azubuike said the new rate will not have negative effect on further implementation of the NIID across the country.
He said this is because the third party motor insurance which is the main target of the initiative is a compulsory policy not optional.He said with the digitalisation of operations of law enforcement agents, motorists cannot have their way and will have no choice than buy their i surancesfrom genuine operators and have their claims paid when risk crystalises.
He said it may have effect on comprehensive motor insurance which is optional not on motor Third party insurance.
Also speaking, the Deputy General Manager of Sales Sovereign Trust Insurance plc Mr Olusegun Bankole said the NIID is meant to warehouse all genuinely insured vehicles in Nigeria.
According to him, with the new rate, NAICOM has ensured uniform rate for all motor insurance.
He said if operators do not circumvent the new rate, it will not affect the spread or implementation of the NIID to the remaining parts of the country. He said if the operators do not circumvent the new rate, it will not affect the spread of the NIID. He said the structure of the NIID is that unless you are genuinely insured by paying the stipulated rate you will not be captured by NIID and with that he suggested that insurers should work hard in terms of delightful services to customer as well as in payment of genuine claims.
NIA Director General, Mrs. Yetunde Ilori, said the NIID has not been effective in all states has recorded achievements.
According to her, in the states where it has been implemented, the initiative is aiming at crossing the 4 million mark targeted by the insurers from the onset.
He said the industry has resonated around 3 million and moving to 3.6 million.
According to Ilori, the 4 million plus mark is within reach this year. She anchored her argument on the adjusted motor insurance premium saying “ with what we see with the adjusted third party premium, companies are planning to hit at least a combined 4.5 million this year.
Ilori said there was high anticipation that “we will move up.” She reckons that the public attention is revolving and concerned that the third cover policy works and it is real beyond just keeping the policy but enforcing it to get claims paid at the point of risk happening.
