Nigeria battles insurance scammers

Ikenna Ozuola, a commercial motor driver based in Lagos, does not worry where he gets the third-party insurance papers for his vehicles.

Ozuola, who has three commercial buses, understands that the police, who regularly check vehicle papers to ensure compliance with the law, lack the skills and technology to verify which insurance papers are genuine or fake.

Like Ozuola, Adeola Kabiru, another commercial bus driver in the Iyanapaja area of Lagos, says he has never obtained insurance papers from operators but uses fake papers, since the police rarely find out: “What the police and other law enforcement agents check is whether the insurance paper is either stamped or sealed.”

Mary Ubangha, the division police officer at Sabo Police Station, Lagos, admitted that a large proportion of motor insurance certificates in the country are fake.

Sunday Thomas, director-general of the Nigerian Insurers Association (NIA), said that despite the complaints and challenges faced by the insurance industry, there is a need to abide by the existing laws.

He said Nigeria’s Insurance Act 2003 prescribes compulsory third-party motor insurance.

The Insurance Act of 1945 stipulates that no person shall use, or cause or permit any other person to use, a motor vehicle unless such a motor vehicle is insured against damage to the property of third parties.

Thomas said the government’s commitment to protecting third parties involved in an accident prompted it to make third party motor insurance compulsory for every vehicle owner.

Obtaining vehicle insurance before using or keeping a motor vehicle on public roads is a global practice that should be embraced by all.

He said the $25.12 base premium per annum charged by insurance firms for third party motor insurance is cheap, but that many vehicle owners ignore it while others obtain fake papers at half the price.

Thomas said Nigeria’s huge population is an advantage the insurance industry should exploit but regretted that less than 10% of Nigerians hold any form of insurance.

He said motor insurance constitutes about 26% of industry coverage while the annuity market is on the increase, equally at 26%.

However, he said housing insurance is still a grey area that needs to be explored. Participation remains low because of poor mortgage financing in the country.

He said this could be reversed with the establishment of the Nigeria Mortgage Refinance Company (NMRC),  incorporated in 2013, which seeks to expand access to housing finance and help cut a national deficit of 17m houses.

Safe as houses?

“Today, mortgage insurance is almost nonexistent and making the NMRC work will boost mortgage and insurance in that sector.”

He said the industry has taken drastic measures to tackle fake insurance, and that the industry is being sanitised by implementing electronic verification exercises.

He said the Nigeria Oil and Gas Industry Content Development Act 2010 has also boosted acceptance of local insurance by operators.

Implementation is being monitored by the Nigerian Content Development and Monitoring Board.

The Act stipulates that all regulatory authorities, operators, contractors, subcontractors, alliance partners and other entities involved in any project, operation, activity or transaction in the Nigerian oil and gas industry shall consider Nigerian content as an important element of their overall project development and management philosophy for project execution.

The Act mandates that all operators, project promoters, alliance partners and Nigerian indigenous companies engaged in any form of business, operations or contract in the oil and gas industry should insure all insurable risks related to its oil and gas business, operations or contracts with an insurance company, through an insurance broker registered in Nigeria under the provisions of  the Insurance Act as amended.

It mandates operators to submit to the Board a list of all insurance companies and insurance brokers through which insurance covers were obtained in the past six months, the class of insurance cover obtained and the expenditures; a forecast of insurance covers required during the next six months, and the projected expenditure for the covers and the annual insurance premium budget for the past one year in naira and foreign currencies.

“No insurance risk in the Nigerian oil and gas industry shall be placed offshore without the written approval of the National Insurance Commission which shall ensure that offshore Nigerian local capacity has been fully exhausted,” it states.

It also mandates that Nigerian independent operators be given first consideration in all projects for which a contract is to be awarded in the oil and gas industry, including insurance covers for oil projects.

Embrace legislation

Lagos State residents have also been urged to embrace insurance. Legislator Rotimi Olowo promised to help in passing laws that promote insurance business in the state, during a visit by insurance operators to the state House of Assembly.

Cornellie Karekezi, group managing director, Africa Reinsurance Corporation, said low capital base is affecting African insurance firms’ ability to take big ticket risks and handle offshore transactions.

He said capital base determines business retention in the sector and called on insurers to improve their capital bases to enhance market growth.

Barineka Thompson, director, inspectorate, of the National Insurance Commission (Naicom), said the body will continue to protect policy holders from the failure of any insurance institution by ensuring the institution is adequately run.

“Section 40 of the Naicom Act 1997 requires appropriate steps to be taken for the purpose of protecting policy holders or potential policy holders of an insurance institution against the risk that the insurance institution may be unable to meet its liabilities or fulfil the reasonable expectation of policyholders or potential policy-holders.”

“Naicom’s role is to facilitate the orderly conduct of insurance business through appropriate regulation.

“We have implemented the requirements of the law as it concerns minimum capital requirements for operation of insurance companies, consumer protection, solvency and orderly exit of companies.”

Boosting insurance operation in the country would require improved action on compulsory insurance such as motor third party liability; employers’ liability; employers compensation; occupiers liability and builders liability, it is believed.

Awareness creation, improved tailored products and distribution channels, capacity building, and supervision are expected to enhance industry output, and drive the demand for insurance among Nigeria’s 170m population.

Michael Nwadike