As Third-Party Insurance Returns to Front Burner
The Nigerian police have begun inspection of vehicles to enforce the law on the compulsory third-party insurance policy, which they say is intended to ensure the safety of others and provide financial compensation for damages, injuries, or loss of life in the event of accidents covered by the policy. However, with the licensing of the NPF Insurance Company Limited two months before the current crackdown on vehicle owners, analysts said the onus lies on the police authorities to convince Nigerians that the exercise is not self-serving, reports Festus Akanbi
For most of last week, there were expectations that the usually chaotic Lagos roads would erupt into a battlefield of law and desperation as police officers, armed with authority and determination, would descend upon unsuspecting motorists, demanding proof of third-party insurance.
In Akwa Ibom State, the enforcement was led by the state commissioner of police, Mr Baba Mohammed Azare, on February 1, 2025. Reports said Uyo and its environs were deserted, as the police began thorough stop and search, to ensure that motorists in the state comply with the directive, just like the other states of the federation.
Drivers slammed on their brakes, some frantically reaching for documents, others attempting reckless U-turns in a futile bid to escape the tightening noose.
For those with valid papers, it was a victorious march through the barricades; for the unprepared, it was a brutal reckoning – Lagos, like other states of the federation, had once again reminded its citizens that the law bows to no one.
As promised, the Nigeria Police Force on February 1, 2025, launched a nationwide enforcement of third-party motor insurance. On paper, this new initiative aims to curb the high number of uninsured vehicles on Nigerian roads and provide victims of accidents with proper compensation.
While the policy has been established under the Insurance Act of 2003, many Nigerians, especially vehicle owners, remain uncertain about the details and implications of this enforcement.
Regulatory Endorsement
In a statement released by the National Insurance Commission (NAICOM), titled ‘Understanding the Latest Announcement of the Enforcement of Third-Party Insurance by the Nigeria Police Force,’ it was revealed that third-party insurance is the minimum coverage compulsorily required by law for any vehicle on Nigerian roads, while Comprehensive Motor Insurance is optional and recommended.
The statement reads: “The National Insurance Commission welcomes the announcement by the Nigeria Police Force that, effective 1st February 2025, there will be a nationwide enforcement of Third-Party Motor Insurance for all vehicles on Nigerian roads. This move aims to ensure compliance with Section 68 of the Insurance Act 2003.
The commission explained that “Third-Party Motor Insurance is the minimum coverage compulsorily required by law for any vehicle on our roads, while Comprehensive Motor Insurance is optional but recommended and that the purpose of every vehicle on the road having Third-Party Motor Insurance is to ensure the safety of others and provide financial compensation for damages, injuries, or loss of life in the event of accidents covered by the policy.”
Reacting to the announcement, the Chairman of the Nigerian Insurers Association (NIA), Mr. Kunle Ahmed, welcomes the development, noting that it is a timely and commendable action by the Nigeria Police Force. He further emphasised the importance of enforcing the policy to improve risk management, industry innovation, and fostering economic growth.
According to him, “The enforcement of third-party motor insurance is not only a compliance issue; it is a vital strategy for ensuring financial protection for victims of road accidents and the car owners.
“The third-party insurance policy also provides compensation for property damage and medical care for injured third parties, which further contributes to building confidence in the insurance sector.
“The NIA recognises the immense potential of this enforcement to drive positive change in the insurance industry and the broader economy. With millions of vehicles on Nigerian roads, this move is expected to increase the number of genuinely insured vehicles, reduce the prevalence of fake insurance policies, and create a more robust safety net for motorists and road users alike,” he remarked.
The Third-Party Motor Insurance Policy is sold for a premium of N15,000 per year to private car owners, while the premiums for commercial vehicles vary depending on the type of vehicle and it offers policyholders coverage up to N3 million to repair or replace the property of an innocent third party damaged during an accident. It also provides access to limited medical care for any injured third party as a result of the accident.
In addition, it provides financial compensation to the family of the deceased innocent third party in the event of death. Furthermore, the Third-Party Motor Insurance Policy now includes third-party motor insurance coverage for the vehicle if driven to any West African country, as per the ECOWAS Brown Card Scheme.
The Controversy
However, as policemen take positions at strategic areas on the road in major cities and towns in the country, insurance operators are divided about the timing of the ongoing exercise. Industry sources said the current inspection might have been triggered by the controversy trailing the licensing of NPF Insurance Company Limited as a general insurance underwriting company by NAICOM on November 28, 2024, having fulfilled all registration requirements according to NAICOM.
Critics had frowned at the licensing of a police insurance company when the government at all levels is divesting their ownership of businesses to private sector operators. For instance, the federal government divested from NICON Insurance, Nigerian Reinsurance Corporation and Niger Insurance. Lagos State Government divested from LASACO Assurance, Edo State from Bendel Insurance while Akwa Ibom State divested from Anchor Insurance. This being the case, insurance sector analysts argued that to have the Nigerian Police Force as a federal government agency register an insurance underwriting firm leaves a big question.
Such critics believed the newly licensed NPF Insurance stands a better chance against other insurance companies since the inspection of vehicles for third-party insurance is being carried out by policemen on the road.
This category of industry analysts therefore draws a connection between the licensing of the NPF Insurance company and the commencement of the general inspection for third-party insurance certificates nationwide.
They also argued that if at all there is any sector the police want to invest in, it should not be insurance which laws it is meant to enforce but has not performed up to expectation over the years due to compromise with the law breakers.
Questions were also raised about the ability of the newly registered insurance firm to meet its obligations considering the deluge of the vehicle owners who are bound to patronise its insurance company for obvious reasons.
“It is natural for people to patronise the enforcer of the law, an indication that many vehicle owners are bound to patronise the NPF Insurance company at the detriment of other operators in the industry,” an insurance analyst said.
In the view of analysts, this particular policy is the core area of interest of the police in establishing their own insurance underwriting firm. As such there is fear that with the latest development, the loss of another class of business by insurers is imminent just as they lost their pension to the National Pension Commission and Workmen Compensation to the Nigeria Social Insurance Trust Fund (NSITF).
Meanwhile, former Managing Director Coronation Insurance, Mrs. Adeyinka Adekoya, said since the NPF Insurance Company has been given the licence, there was nothing anybody could do.
According to her, the police are the agency to enforce public compliance with compulsory insurance but as long as it would not mandate the insuring public to insure with its own company, nothing stops the firm from operating in the open market like other underwriters.
She advised the police to do the work of enforcement of the policy which the industry has been yearning for over the years as a public servant.
“They should do the work as if they are working for Nigeria,” she said.
On the fear of rate cutting, she said NIA last year addressed the problem by mandating that every insurance firm selling motor insurance passes through the Nigeria Insurance Industry Database (NIID).
“Everybody would pass through the NIID platform. As such they can’t sell below N15,000.
As policemen continue to reach out to all the crannies of the country for the enforcement of the law on third-party insurance, analysts advise the police hierarchy to ensure there is adequate monitoring of police personnel to avoid the enforcement being hijacked by overzealous officers who might weaponise the exercise to extort Nigerian vehicle owners.
