Motor Insurance Simplified

In the article marking the International Day for Tolerance on Saturday, November 16, I promised to break down and simplify motor insurance.

With the festive season and the attendant increase in vehicular movement and associated risks, it has become all the more important. In Nigeria, there are three main types of motor insurance in practice: We have the Motor (Third Party) Insurance, Motor (Third Party), Fire and Theft and Comprehensive Motor Insurance.

The Motor (Third Party) Insurance: The Motor (Third Party) is the minimum motor insurance you must have before you drive your vehicle on a public road. Public road means a road where the public have access to. Motor insurance was compulsory even before Nigeria’s independence in 1960. The Motor Vehicles (Third Party) Insurance Act of 1945, which took effect from 1st April 1950, made this minimum motor insurance compulsory. It makes provisions for liabilities the policyholder or anybody using the vehicle with a valid driver’s licence and permission of the owner, is protected against. The liabilities covered are for third party bodily injuries and death (treatment of people your vehicle injured or benefit  to those your vehicle unfortunately killed).  With the Insurance Act of 2003 as amended, third party insurance now covers liabilities for third party property damage. Unlike third party liabilities for bodily injuries and death which are unlimited, third party property damage has limits.

With the new motor insurance tariffs, if your car damages a third party property (car, house, etc) your insurance company is obliged to compensate the third party to the maximum of N3m on your behalf. If your vehicle carries own goods only, your insurance company will compensate the third party to the tune of N5m. The limit for compensation to third parties for damage caused by tricycle is N2m and N1m for motorcycles. Trailer limit of liability is N5m. I said earlier that bodily injuries and death are unlimited because you cannot put value on life and bodily injuries. But in reality, the injured third party or the family of the deceased start with mediation with the insurance company. If that fails, they go for arbitration. These must be exhausted before any party can go to court.

The premium to enable policyholders to be entitled to these protections are: N15000 per annum for private motor, N20,000pa for own goods vehicles and buses, N100,000 for trailers, while tricycles and motorcycles are N5,000 and N3,000, respectively. For these benefits to apply, the insurance policy must be genuine. If the tortfeasor (guilty party) has an insurance policy that is fake or expired, there will be no insurance to fall back on. The guilty party must bear his cross. Some people resort to fighting on the road to resolve the accident. This is not necessary. There is an app called NIID (Nigeria Insurance Industry Database). Every motorist should download it on his phone. In the event of an accident, first of all take photos or videos of the scene if it is safe to do so. Then use the vehicle registration (number plate) of the guilty person to check the status of his insurance using your NIID App. Any vehicle that is not captured on the NIID App is either not insured or carrying a fake insurance. Either way, he has breached the Motor Vehicles (Third Party) Insurance Act of 1945. The penalty is a fine of N250,000 fine or/and one year imprisonment. It is up to the person in the wrong to cooperate or risk going to jail. Na so e suppose be, but….

Now, let us to go practical. A vehicle hit a friend on mine. He contacted me and after I checked the wrongdoer’s insurance status on the NIID app, I found out that he had no valid insurance. Even before I called back, the man had agreed to fix my friend’s vehicle. Necessary contacts and agreements were reached at the scene, case closed. If a commercial bus, tricycle or motorcycle damages your property, do not hope on insurance because they scarcely have genuine insurance. As I was writing, a client whose vehicle was hit from behind by a commercial bus driver called me. Of course, he had no insurance and the police have impounded his bus. My client has comprehensive insurance, so his insurance company will fix his car. If the insurance company is interested, it can go and recoup from the bus driver after fixing my client’s car. It is called right of subrogation in insurance, but I know the insurance company will not bother.

Insurance operates based on the assumption of uncertainty. Even death which is certain is insured under life insurance because the date and time of death is uncertain. But the level of certainty of accident is too high with commercial buses, tricycles and motorcycles, so many insurance companies avoid giving them comprehensive motor insurance because you don’t insure what you are certain will happen. The best they get is third party insurance which is compulsory, but do they care? Even the few insurance companies that extend comprehensive insurance to them charge higher premiums to take care of the extra risks.

The probability of getting compensation from commercial buses, tricycles and motorcycles owners is low. Personally, I don’t bother myself because at best they will lie down and beg for forgiveness. At worse, they can mobilise their colleagues and attack you. Two motorists were lynched by motorcycle riders whose colleagues were responsible for the accidents that claimed their lives. The summary of what I am saying is that safety first before enforcing your rights. Sadly, at least 70 per cent of vehicles on Nigeria roads do not have valid insurance policies. Personally, I do comprehensive insurance (read below) for my vehicles partly because of this. Vehicles are very expensive and I need to protect what I have.

Third Party, Fire and Theft Motor Insurance (TPFT) Cover: This is the second type of motor insurance. This policy covers all the above. In addition, it covers the insured against theft of his vehicle and loss of, or damage to the vehicle, by fire, external explosion, self-ignition and lightning. The policy, however, does not cover damage caused by explosion of any boiler forming part of, attached to, or on the vehicle. Obviously, the policy, like all policies, also does not cover arson, because it is not only a deliberate act, it is a criminal act.

Comprehensive Motor Insurance: This is the most elaborate motor insurance policy. In addition to all the liabilities highlighted above (third party liabilities and own damage), a typical Comprehensive Motor Insurance Policy covers the loss or damage to insured vehicles as a result of vandalism, accidental damage or collision, overturning, etc. These days it also automatically covers flood damage, losses arising from strikes, riots and civil commotions (SRCC) and waiver of excess (Excess is the portion of each and every claim a policyholder bears. It is present in all non-life insurance policies). The reason for having excess in all non-life insurance policies is to encourage the policyholder to exercise the highest standard of care and treat the asset as if it were not insured.

Comprehensive Motor Insurance is also the only motor insurance that makes provision for medical expenses for the policyholder, his driver and other occupants of the vehicle as a result of injuries suffered in an accident involving the vehicle. The amount is usually fixed, but can cover the entire medical expenses when the injuries are minor. You need a separate personal accident insurance cover for major injuries. The premium for comprehensive is five per cent of the sum insured. It can be higher if the risk is heightened.

What I have said so far might still sound technical to some of us. That is why I advise every policyholder to go through an insurance broker. Their normal services are FREE for policyholders because brokers get their commission from insurance companies. An insurance broker is an insurance professional (individual and corporate) registered by the Nigerian Council of Registered Insurance Brokers and licensed by the National Insurance Commission, the insurance regulatory body, to act as an intermediary between the insuring public and insurance companies. Their job includes: guiding the potential policyholder to get the best deal, advisory services, pursuing and processing of claims, etc. With an insurance broker, you have everything to gain and nothing to lose. You can get an insurance broker of your choice at: naicom.gov.ng and https://ncrib.net.

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