Re: The NAICOM Cartel And Its Cut-Throat Motor Insurance

I was shocked to read the article with the above heading in GWG. My initial intention was to call the writer to explain how Motor (Third Party) Insurance works. But his article is public and he has misinformed the reading public. In addition, he has maligned insurance practitioners with his acidic adjectives in describing them. It is therefore imperative that I respond to him publicly and let him know he is totally off the mark.

To start with, his comparism of statutory Motor (Third Party) Insurance with optional DSTV subscription is misplaced. One is compulsory, the other is optional. I went for about two years without DSTV to avoid distractions, but I will not allow my motor insurance to expire for even a day.

To the main issues, the National Insurance Commission (NAICOM) is a federal government agency saddled with the responsibility of regulating the insurance industry. It is the equivalent of the Advertising Regulatory Council of Nigeria (ARCON) for advertising companies, which the writer is very familiar with.

Architects, town planners, surveyors, doctors, engineers and other professional bodies all have such federal government regulatory bodies. So NAICOM is not part of any “cartel” working with insurance companies, re-insurance companies, insurance brokers and loss adjusters. NAICOM is their regulator, not part of them, just as the Central Bank of Nigeria regulates the operations of banks.

The circular in question, dated December 22, 2022 (see attached) emanated from NAICOM as part of its regulatory functions. It is not as if industry practitioners got up and jointly decided on it. While NAICOM does consult with industry players when it deems fit, it is not under any legal obligation to do so. NAICOM in the circular did not only increase the premium, it also increased the limit of liability of various classes of motor insurance for third parties (other road users).

The limit of liability is the maximum an insurance company will pay on behalf of the policyholder in the event of an accident. Private motor third property limit was increased from N1m to N3m; own goods limit was increased to N5m; staff bus was increased to N3m; trucks/general cartage; special types was increased to N20m; tricycle was increased to N2m and N1m for motorcycle.

Please remember that Motor (Third Party) Insurance is for the benefit of third parties, not the policyholder. What NAICOM did was to increase insurance compensation for third parties. To enable insurance companies meet with up with this extra responsibility, it increased the premium.

The Motor Vehicles (Third Party) Insurance Act of 1945, which took effect from 1st April 1950, makes it an offence for anybody to use a motor vehicle on the road (road here means any road to which members of the public have access) without having in place the minimum Motor (Third Party) Insurance to cover the motorist against liabilities arising from third party bodily injuries or death. The Insurance Act of 2003 extended the cover to take care of liabilities arising from damage to third party property to the tune of One Million Naira.

What NAICOM did was to increase third party property damage for all categories of vehicles. The damage of third party property by private vehicle owners was increased from N1m to N3m with a corresponding increase in premium from N5,000 to N15,000. That is where the uproar is, but why?

We have carefully ignored the commensurate benefits and focused only on the increase in premium. You can look at the issue from many dimensions. One, more private vehicle owners are affected by this increment. Two, the N5000 premium policyholders used to pay was “chicken feed” to many to get motor insurance certificate and get “irritant” and “nosey” law enforcement agents off their backs. Now, N15,000 is no more “chicken feed.”

Now you need to take your time to know the benefits or relief your N15,000 can provide for you: If you hit a third party and he is injured, your insurance company is liable to pay for the cost of treatment. God forbid, if your vehicles kills a third party on the road, your insurance company is liable. In the case of injury, the hospital bill will provide a basis for compensation. If it is death, the family of the deceased will meet with the policyholder/his insurance company to agree on compensation. Where no agreement is reached, you go to court.

In the event of property damage, the limit is N3m (at the time of writing, I was handling a third party claim). Death or bodily injuries cases, are not subject to indemnity because you cannot place a value on life, injuries or loss of limb. The remedies I highlighted earlier and others like the annual income of the deceased are what are applicable in determining compensation.

Some commentators like this writer have been accusing NAICOM of being insensitive to the plight of ordinary Nigerians. Are third parties who will benefit from these new rates not among ordinary Nigerians? I ask, there are over 200m Nigerians out of which less than 10m own cars. Are all car owners in Nigeria part of the “ordinary Nigerians?”

At the minimum it takes roughly N10,000 to fuel your car and keep it on the road monthly, while the N15,000 new premium is the annual premium. Ten thousand naira a week times 12 months comes to N120,000 a year to keep your car on the road. This a far cry from the N15,000 premium per annum for third party.

I personally feel the challenge people have with the hike in the rate of TP premium is the general lack of appreciation of insurance in Nigeria (insurance penetration in Nigeria is less than one percent) and lack of appreciation of the benefits of Motor (Third Party Insurance). That is what I feel practitioners should deal with and how to build trust in Insurance.

 One thing for sure about the new rates is that potential policyholders will take more interest in the benefits of the third party insurance they are buying as highlighted above. Fifteen thousand naira, unlike N5,000, is not chicken feed. Policyholders will also take more interest in where they get their motor policies. Certainly, you won’t go under the bridge to get TP insurance with N15,000. Local government offices are also not licensed to issue insurance policies. If an insurance company gets a space in a local government office to issue motor policies, it is a different matter.

The only companies licensed to sell motor insurance in Nigeria are underwriting companies and Registered Insurance Brokers (RIB). Their names are on the NAICOM website: https://www.naicom.gov.ng, Nigerian Council of Registered Insurance Brokers website https://ncrib.net and Nigeria Insurers Association website: https://nigeriainsurers.org. If you go to anywhere else, you risk buying a fake motor insurance policy and the implications are grave: in the event of an accident, you are on your own. You have to bear all the third party liabilities, in addition to own damage. In addition, if you are caught, you risk a fine of N250,000 or/and a year imprisonment for not having a motor insurance before using your vehicle on a public road.

People like the writer saying that the hike in premium will force people to go for fake motor insurance certificates should have a rethink. There is a platform called Nigerian Insurance Industry Database (NIID). Many police officers on the road have the app on their phones and can use your vehicle number or insurance certificate to check if your insurance is fake or genuine. If it is fake, you either pay N250,000 fine, or/and go to jail for a one year or the police will do what they like with you.

Francis Ewherido, is the CEO of Titan Insurance Brokers Limited, and a columnist of GWG.

NB: I have known the writer of the article, I reacted to, Mr. Felix Oboagwina, for 39 years. He was a year my senior at the Mass Communication Dept, UNN. He is usually a very quiet fellow, but the words he used to describe insurance practitioners are too acidic and undeserved.

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