Of Motor Insurance Premium and Seamless Claims Settlement

 As insurance sector operators struggle to have motorists cooperate with the new Motor Third Party insurance premium recently announced by NAICOM, analysts said seamless claims payment on the policy is the right way to go, writes Ebere Nwoji

Controversies trailing the 200 per cent increase on premium rate payable on Motor Third Party Insurance announced by the National Insurance Commission (NAICOM) three months ago is currently dividing the motor insurance market between genuine insurers and fake certificate peddlers.

Indeed, checks by THISDAY reveals that despite the Nigeria Insurance Industry Data Base (NIID) which is thought to have solved the problem of fake motor Insurance certificate hawking in Nigeria, some motorists vowed they would rather buy from fake certificate hawkers than pay as much as N15000 on their Motor Third Party insurance.

But industry analysts have said that insurers’ positive attitude towards Motor Third Party Insurance claims attract motorists to genuine insurers.

Insurance Claim is a formal request for compensation made by a policyholder from an insurance company for loss (es) suffered under the terms/conditions of the policy. Although a claim could be filed by a third party like Lawyer or broker, only the person listed as beneficiary on the insurance policy is entitled to receive payment.

Reaction by motorists

Since the National Insurance Commission (NAICOM) announced the upward review on motor Third Party Insurance effect from January 1, 2023, not few motorists especially commercial vehicle operators raised serious eyebrow on the commission and insurers on the new premium regime.

A good number of motorists told THISDAY that their main concerns was that insurance had not worked for them.

According to one of the drivers, since his operations as a commercial bus driver, he has been renewing his insurance papers but had not received a dime from any insurance firm when involved in an accident.

Asked why? He replied that in the first place, the third party whom the compulsory insurance covers would not have patience for him to contact his insurance company because they were always in a hurry to have their vehicle repaired. He said he preferred to beg the vehicle owner and where in one or two cases the vehicle owner insisted on getting his vehicle repaired for him, he would just use his money and repair it.

Asked if he has made attempt to file claims to insurance firm after repairing the vehicle, he said in one of the cases he tried to file the claim due to huge amount involved, but the insurance firm said he should have shown them the damaged vehicle before embarking on repairs and declined refunding him the money he spent.

Querying how he could have shown the vehicle to the insurer when the vehicle owner blocked him on the high way insisting on instant repairs he concluded that claims on Motor Third Party Insurance was a ruse.

Ideally insurance business is all about claims payment and claim is the main reason a policyholder takes up an insurance policy.

Without claims being paid by insurance companies, people are not likely to take up insurance policies. In every insurance contract, there is always a promise that when the eventuality (claim) happens the insurance company as a risk bearer will be there to compensate the insured/policyholder.

 Therefore claims payment serves as a test instrument that determines the extent to which an insurance company lives up to the ‘utmost good faith’ promise. In other words, claim payment serves as brand image of an insurance company.

Motor Third Party Insurance

One of the reasons the compulsory Motor Third Party Insurance policy is prone to fake certificate sellers’ abuses is because claims payment on it is rare. The reason being that insurers themselves perhaps because of the N5000 official premium attached to the policy for over 20 years before the January 1, 2023 review, did not see it as policy they should bother themselves about claims payment. As such, they joined hands with the members of the insuring public to abuse the policy.

This they did by stooping low in premium charges with the intention not to pay claims when risk occurs.

For instance, though the official premium on the policy prior to January 1 2023 was N5000, some insurance firms collect as low as N1000 because deep down in their hearts, they knew they will not pay claims when it comes and this has brought a misconception that the Motor Third Party Insurance does not have claims attached to it. This is the general assumption of the insuring public on the policy as such with this assumption many motorists choose to get their insurance certificate from anywhere mainly at licensing offices and from hawkers of fake certificate just for the purpose of passing police check points.

Analysts View

But against the backdrop of controversies that characterised the upward review of the compulsory Motor Insurance and the quantum of claims attached to it which is from N1, 000,000 to N3, 000,000 analysts have viewed that if insurers should change their attitude towards claims payment on the policy, by seamlessly paying every genuine claims filed on the policy, despite the on going controversies trailing the premium increase, many motorists will pay the N15000 new premium without further argument and would prefer to obtain their insurance cover from genuine insurers rather than patronising quacks.

This they said is because the commission did not only increase the premium but also increased the Third Party Liability claims by the same 200 percent.

The analysts said it was because of the prevailing poor attitude of not paying claims on the policy, that made the insuring public to loose interest in the corresponding increase on claims payable on the policy because since the announcement on the increased premium and increased claims, the question on every lip is how many people have received claims on Motor Third Party insurance from any insurance company.

Insurance Consumers

In its protest letter against the increase, Insurance Consumers Association (INSCAN), which claimed to be representing almost 20 million motor insurance consumers in Nigeria, stated, “We are not impressed by your corresponding increase in the indemnity limit to N3 million as the questions on the lips of our members are who requested for this increase to N3 million, how many claims have you really settled even when the limit was N1 million,  are you aware that many fleet owners on their own volition do pay extra premium to the underwriters to increase their TPPD limit to N5 million and where are the insurance ratios to justify that premium increase by whooping 200 percent?”

INSCAN National Coordinator, Yemi Soladoye, in a protest letter titled, ”Demand for Reversal of Your Policy Directive on the Increase of Motor Third Party Insurance Premium in Nigeria by 200 Per cent Under One Week Notice to the Nigeria Insurance Consumers,” noted that the increase required a staggered increase first to N7, 500 and subsequently to N10, 000, N12, 500 and ultimately to N15,000 within a 10-year period.

Soladoye explained that the recommendation was not limited to premium increase but that there was a mandate to NAICOM in 2012 to include in the process initiatives that will ensure, “The emergence of high level confidence in insurance mechanism in Nigeria to the extent that by the year 2012, mere exchange of insurance papers would resolve any accident/damage dispute among Nigerian motorists.”

Operators’ view

Indeed the Deputy General Manager of sales Sovereign Trust Insurance Plc, Mr. Segu Bankole, had in a telephone chat with THISDAY lamented that the problem of the Motor Third Party Insurance was too many abuses by both fake certificate sellers and genuine insurers.

He said some insurance operators abuse the policy by declining to pay claims emanating from it mainly because in their quest to rake in premium they cut the rate and charge as low as N2,000 and resolve within themselves not to pay any claim that emanate from such low charges.

He said such insurers sweep claims from Motor Third party Insurance under the bed proving to the insured that there are no claims attached to it.

Section 68 of the Insurance Act, 2003 provides: (1) “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.”

Another section of the Act provides for N1000,000 claims to the third party for death or permanent disability but this was raised to N3000,000 by NAICOM during the recent increase on the premium payable on the policy. Though the Managing Director of Royal Exchange Assurance Mrs. Ebelechukwu Nwachukwu and her co insurers have viewed that the best way to make the insuring public buy into the new premium rate and prevent mass patronage of fake certificate peddlers analyst have insisted that seamless claims payment on the policy is the right way to go.

Problem of insurance in Nigeria

In Nigeria, the problem of insurance industry is bad image. This has for decades stood as bane of the industry’s growth. The bad image problem of the industry dates back to early 19th century when insurance business underwriting was taken over by Nigerians from the early British managers running the few available insurance companies in the country.

The way the then Nigerian managers carried out insurance business transactions especially in the area of claims payment made the public to see insurers in bad light. Indeed not until few years back, insurance industry operators were seen as group of fraudulent people that were out to collect people’s money only to cook up stories when claim occurs

The industry operators realising this few years ago expressed determination to embark on image laundering for the industry through publicity, enlightenment campaign and improved claims payment.

The regulator, way back in the years of Fola Daniel as the commissioner for insurance pushed up the capital base of insurance firms to the present level of N 3 billion for general business to make claims payment easier.

Some of the industry operators have been proving that it is no longer business as usual through positive attitude towards claims payment. But there are still bad eggs tarnishing the industry’s image through claims denial. Such companies even deny claims on comprehensive motor insurance but the regulator has always insisted that claims payment is the right way to go.

Insurers’ Efforts 

Effort in this direction started during the administration of Chief Oladipo Bailey as the industry regulator when in 2002, he compelled the operators to pay claims that emanated from the Ikeja cantonment explosion. Indeed Bailey prevailed on the operators to pay both genuine and spurious claims from the incident as a way of advertising the industry. Also during the Dana Air crash of June 3, 2012, both the umbrella body of insurers the Nigerian insurers Association and NAICOM prevailed on operators involved in the contract to pay claims to the victims’ dependants not minding that some employers of the victims have not renewed the contract, which was due for renewal in January. The insurers were compelled to pay the claims under the consideration of what the then chairman of Nigeria insurers Association (NIA) Mr Ladipo Ajayi called ‘gentle man’s agreement’.

These are meant to advertise the industry as claims paying industry before Nigerians and to save the industry from the existing bastardised image occasioned by non-payment of genuine claims by the early practitioners.

The most recent was the undeniable claims payment made by the industry on damages from the #endSARS protest in which the industry paid over N11 billion.

Here in Lagos claims payment to Lagos State Government workers on group Life insurance made the governor Sanwo Olu eco emergency one of the brand ambassadors of the industry; thus advertising the industry by himself due to his positive claims experience from the insurers.

To ensure that genuine claims are paid without much argument both the NIA and NAICOM had set up what they tagged customer compliant bureau where any member of the insuring public that has unsettled claims should lodge his complaints.

According to NIA, the bureau will serve as a place where displeased claimants can lodge complaints against insurance companies in Lagos.

At the inauguration of the bureau, the then NIA chairman, Mr. Olusola Ladipo-Ajayi, had identified the need to change the poor public perception of the insurance industry as a major reason for introducing the bureau.

According to him, ”Over the years, incidences of unsatisfactory response to settlement of claims by underwriters seem to have contributed to the poor public perception of insurance as a financing option. Today, we want to shake off the yoke of the inglorious past and chart a new beginning for the insurance industry anchored on the principles of trust and utmost good faith, the basic pillars of insurance practice.”

Analysts have viewed that for motorists in the country to comply willingly with the new premium rate, all hands must be on the deck to ensure that payment of claims on Motor Third Party insurance is without excuses.

The analysts said both NAICOM and NIA should resuscitate every organ targeted at compelling operators to pay every genuine claim without delay. 

A recent World Insurance Report shows that “a less than satisfactory claims experience prompts one in five customers to switch insurance providers”.  As such, no insurance company worth its salt will neglect the issue of claims because doing so is at its peril.

This being the case, insurance firms involved  charging half hazardous premium on Motor Third Party Insurance with intention of shirking the claims should desist from that and charge the new official rate of N15,000 so as to be in position to pay claims when it crystalizes.

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