Posts in category: Insurance

In Nigeria, automobile third-party insurance is a crucial aspect of vehicle ownership and operation. It provides financial protection against liabilities arising from third-party bodily injury, death, or property damage caused by the insured vehicle. Understanding the intricacies of third-party insurance is essential for both vehicle owners and road users. This article aims to shed light on the significance, coverage, and regulations surrounding automobile third-party insurance in Nigeria.

Significance of Third-Party Insurance: Automobile third-party insurance is mandated by law in Nigeria under the Compulsory Insurance Act of 2003. Its primary purpose is to protect third parties, such as pedestrians, passengers, or other motorists, from financial losses resulting from accidents involving insured vehicles. Without third-party insurance, vehicle owners risk facing legal penalties, including fines or vehicle impoundment.

Coverage Offered: Third-party insurance provides coverage for the following scenarios:

1. Bodily Injury: Compensation for medical expenses, rehabilitation costs, and loss of income incurred by third parties injured in accidents involving the insured vehicle.
2. Death: Financial support for the dependents of individuals who lose their lives in accidents caused by the insured vehicle.
3. Property Damage: Reimbursement for repair or replacement costs of third-party property damaged in accidents.

It’s important to note that third-party insurance does not cover damages to the insured vehicle or its occupants. Vehicle owners may opt for comprehensive insurance to safeguard against such risks.

However, without claims being made by insurance companies, people are not likely to take up insurance up insurance policies, and insurance companies will not maximized profits. Thus claim payment in insurance contracts serves as spice that contract to potential policy holders to insurance patronage.

The National Insurance Commission (NAICOM) needs to make its regulatory power felt on insurance companies with regard to third party insurance and response to claims. It needs to look into challenges and solutions necessary to curb sharp practices, as some insurance companies do play game with response to third party claims. Since NAICOM oversees the regulation and supervision of insurance activities in Nigeria. It sets guidelines and standards for insurance companies operating in the country, ensuring compliance with applicable laws and regulations. Insurance companies offering third-party insurance must adhere to NAICOM’s regulations regarding pricing, coverage, and claims settlement procedures.

Despite the legal requirement for third-party insurance, compliance remains a challenge in Nigeria. Many motorists either purchase fake insurance certificates or operate without any coverage, exposing themselves and others to significant financial risks. To address this issue, stakeholders, including regulatory authorities, insurance companies, and law enforcement agencies, need to collaborate on awareness campaigns, enforcement efforts, and technological solutions such as digital verification platforms to curb fraud and enhance compliance.

Automobile third-party insurance is a vital component of road safety and financial security in Nigeria. By understanding its importance, coverage, and regulatory framework, vehicle owners can fulfill their legal obligations and protect themselves from potential liabilities. Continued efforts to promote awareness, improve enforcement, and enhance insurance industry practices are essential for ensuring widespread compliance and effective risk management on the nation’s roads.

life insurance is very important tool to shield young families. But awareness about and its penetration is very low in Nigeria. This despite the ravages of Covid-19 which did free advertisements for Life insurance in many countries.  Coronavirus did what no amount of advertisement by life insurers could do, pushing business for them through insurance penetration in many countries such as India, Pakistan and Thailand to global average.  From 2.82% in 2019 to 3.2% in 2020 in India and from 2.90 to 3.4 in Thailand in year 2020.

Thanks to the coronavirus pandemic, many more people are purchasing life insurance policies in the South-East Asian region now. According to the Economic Survey 2021-2022, life insurance penetration rose to 3.2% in the year 2020.

Insurance penetration is measured as the percentage of total life insurance premium paid in a year to GDP. Insurance density is calculated as the ratio of premium to population (measured in US$ for convenience of international comparison). But the situation is different in Nigeria due to lack of awareness about the usefulness of life insurance.

The penetration of life insurance is at a low level of 2.4 percent . In the past , life insurance penetration was a little high. But since around 2011, that has gradually declined over the years and even reached its lowest level in a decade in 2016 at 2.2%. Since then it has seen  a marginal improvement and reached 2.72% in 2020.

However, the significant rise in purchase of life insurance by Indians in 2020 can also be gauged by the fact that 44.3% of total premium collected by life insurers in 2020 was from new policies.

Take a look at the case of Abike and her husband Joe, and see the usefulness of life insurance..  Life was not so good to the family when they married initially. But soon her husband got a job as construction worker, operating crane. He  was well-paid  in that company. He also  made extra income from his side working with his wife’s elder brother, Ade in his consulting business. Abike stayed at home raising her first child. She hadn’t worked  since the husband asked her not to  do so when when the baby was born.

As soon as Abike became pregnant with their second child, James started talking about life insurance. He had developed interest for it at a seminar organized for workers in the company where he worked. He was initially hesitant about it. It was not that he wasn’t thinking like an adult; the topic of life insurance was just scary to him. But an old woman in the neighborhood told him how she had been able to send her children to school through the Life insurance her sick husband had bought for them. Then Tony went ahead to buy life policy for the family. The wife was 35 then, pregnant with their yet-to-be-born  third child, and the last thing he wanted to think about was either him or his wife dying.

Little did anyone suspected he could die even in 20 years time.  About five years after he had bought the life policy, he died at the construction site where he was working . He passed away on a Tuesday in March 2020. The weekend before his death, he had attended a wedding party and had especially good time together with his friends. That Monday evening, he had gone to the house of one of his neighbors to celebrate with him the arrival of a new born-baby. He was there with his wife and children. By that time the wife was already pregnant for the fourth time. The next morning, he left for work without his wife seeing him.  There was an important matter he had hinted her the previous night that he would tell her in the morning. But he left while she slept, I’ll never know.

The woman was sitting in a chair in at home when she heard footsteps coming into the house. She turned only to see her elder brother, Engr Paul, who was, like her husband , was a construction worker. It was he who even took her sister’s husband to the company and secured the employment for him as a crane operator. He looked at her and said, “Bunmi, we have a place to go.”

He pulled her out of the chair, and drove straight her pastor’s house. He had called the pastor on phone, informing him about the what happened. The Pastor greeted them warmly. Then he joined them in the car and Paul drove straight to the hospital.  There the pastor held her hand and told her that her husband fell down early in the day and was being attended to in the hospital. Bola’s first words were, “How bad?”

Then the brother just squeezed her hand and said he hope everything would be alright.  But when they  arrived at the ER, the other construction workers were there. It was hard for them to look at her—and that was when she knew that her husband had died. As soon as the burial was over, the  insurance account manager turned up at the door, telling her that the policy cover all the children education  till they grow up.

Her story is a reminder that once you have a family—no matter your age—life insurance is absolutely essential. And the time is now for insurance companies themselves to drum the importance of this class of insurance to the people.

Nigeria is number 41 of 43 countries in the recently released Mercer CFA Institute Global Pension Index 2021. Our retirement income system ranks second lowest in Arica and closes to the bottom in the world.

The global pension index is a combination of three weighted factors: adequacy (benefits paid), sustainability (ability to keep paying), and integrity (confidence in the system). Nigeria ranks 19th globally in sustainability, 41st inadequacy, and dead last (43rd) in integrity. This brought our overall ranking to 41st.

There are three common sources of retirement income. These are the government, the employer, and the individual’s own savings. The first two are often not enough while the third requires education, effort, and discipline.

To improve the retirement system, a bill has been passed in both the Senate and the House during the Obasanjo era. Now what can also help is the need for we can call “: Capital Market Development Act”  The proposed Capital Market Development Act should focus on helping workers prepare better for retirement by allowing portability of benefits, encouraging savings, expanding their investment product choices, promoting financial literacy, among other initiatives.

This is encouraging. Realistically though, this will take longer to materialize and there is no guarantee that the enhancements will be enough. But in retirement planning, time is so critical.

This is where employers can play a vital role given that employees spend the greater part of their lives working for a company. Companies say people are their greatest asset. One way to show they care is to help employees prepare for their retirement. Many provide retirement benefits higher than mandated by law. But simply providing the benefit is not sufficient to ensure the employees can look forward to happy days during their sunset years.

We hear many sad stories about retirees. Those who spent all retirement benefits in just a few years and had to work again. Those who went into business and failed. Those who got scammed. Those who could not afford proper medical care. Those who depend on their children who are already raising their own families. These are tales of discomfort and the absence of dignity. Stories that could have been prevented with some help from their employers.

There are a good number of simple and effective steps employers can take to inspire employees to prepare for life in retirement.

— Improve employee financial literacy through awareness campaigns and education via frequent company communications and annual sessions on personal financial planning.

— Orient new employees early and well to the retirement plan so they appreciate it better to participate and contribute more.

— Include a segment about personal budgeting during company or department annual planning because individuals also need to allocate resources efficiently like companies.

— Increase personal financial planning awareness during times of bonuses and sustain this by building a culture for preparing and risk-proofing the future.

— Offer a more detailed retirement planning session for those at least five to 10 years to retirement, so they can put in place a more robust plan to ensure their readiness.

— Conduct a retirement session for those about to retire so they can have a smooth transition for the expected big change in their lifestyle with a lot of free time, limited interactions with former colleagues, and no more set goals to achieve.

— Create an automatic savings and investment program for employees to encourage them to develop the habit early and to enable them to maximize the benefits of long-term saving and investing.

— Use income and loan data of employees, without violating privacy rules, to spot those who may need more financial education or support. Employees with big loans or habitually applying for one can be a symptom requiring some attention.

— Offer a more flexible set of benefits so employees can fully maximize them and help reduce their out-of-pocket expenses, which can improve savings.

— Review and promote programs that support a well-funded employee retirement like contributory plans, stock purchase plans and stock options.

Ultimately, it is the individual who has the primary responsibility for retirement readiness. But employers can extend more help, guidance and support for their people in this effort. I am certain that the care for employees goes beyond employment, especially when we appreciate our staff as people and not mere statistics.