Insurance: The Compulsory Five

The National Insurance Commission (NAICOM) is the statutory body established in Nigeria to implement all legal provisions as they relate to Insurance in Nigeria and derives its regulatory and supervisory powers from the National Insurance Commission Act 1997 and the Insurance Act 2003.

Over time, the various policies and products were developed to protect the insured and not third parties affected by the occurrence of the insured risk. As part of the effort to further develop the Insurance Industry and address the effect of an event on bystanders, third parties, etc. NAICOM on their Market Development and Restructuring Initiative program has put forward 5 Insurance products that are aimed at providing cover/succour to others (not the insured) in the event of a disaster or accident.

The Five insurance products that are compulsory at the moment are meant to cover the legal liabilities of the property/business owners and not material damage. They are:

• Group Life Insurance (Under the Pension Reform Act 2004)
• Healthcare Professional Liability Insurance (Under the NHIS Act 2003)
• Builders Liability Insurance (Under the Insurance Act 2003)
• Occupier Liability Insurance (Under the     Insurance Act 2003)
• Motor Vehicle 3rd Party Insurance (Under the Insurance Act 2003)

1.              Group Life Insurance

This product is meant for all public and private sector organizations with more than four (4) employees and provides compensation for the death or disappearance of an employee while in service. This can be extended to include medical expenses as a result of the event, permanent or partial disabilities, which is optional and at the discretion of the organization. Also self-employed individuals can also benefit.

Compensation is usually 3 times the annual gross emolument of the insured in the event of death, disappearance or permanent disability (that affects the ability of the insured to earn a living). Medical and temporary disability however attracts a percentage of the gross annual emolument. Death or disability arising from riot, strike and civil unrest also covered.

Premium payable is a function of the annual gross pay and age-next-birthday of the insured. Note that penalty for non-compliance is N250,000 fine and One (1) year imprisonment for every director or officer of the defaulting body.

2.              Healthcare Professional Liability Insurance

This is compulsory for the Medical Institution registered under the NHIS and all the Medical Professionals working therein and provides compensation for patients who suffer Death, Sickness, Permanent Disability, Partial Disability and Injury by Shock from the mistakes, errors, negligence and acts of commission or omission of medical practitioners and institutions. It provides compensation of up to N2m for death or permanent disability of the patient while a percentage of the amount is paid for injuries depending on the degree.

Premium payable is dependent on the number of hospital beds and the Chief Medical Director of the Hospital, the Negligent Medical Professional and the Medical Institution are liable. Penalty for non-compliance include:

·        Personal persecution of the parties involved

·        Revocation of the permit for the institution

3.              Builders Liability Insurance

This policy is meant for all the owners and contractors of buildings of more than two (2) floors under construction and covers construction risk resulting in death or injury of workers or members of the public and damage to properties. Compensation payable is similar to 2 above.

The owner or the Contractor is under the obligation to continue to insure the building until it becomes occupied or for at least ten (10) years from the start of construction even if the building was abandoned.

Those liable include owners and/or contractors of the buildings under construction, sub-constructors, agents, servants and consultants of the contractor or owner of the building. Premium payable is subject to the value of the contract. Penalty for non-compliance is N250,000 fine plus three (3) years imprisonment.

4.              Occupier Liability Insurance

This policy is meant for all business and office premises (government, corporate, private), hotels, guest houses, hostels and residential estates, residential buildings that are let out in full or in part, recreational centres, club houses, cinema halls, schools and training institutions, petrol and gas Stations, hospitals, health centres and clinics (public & private), markets and shopping plazas, any other building except churches and mosques.

The policy pays compensation for any user, licensee or member of the public who dies or becomes injured as a result of fire, flood, storm, earthquake or collapse of the building or property damage. Optional payment of compensation include: compensation for rent of an alternative accommodation for one (1) year for the displaced insured occupier and or his family and death or permanent disability to the occupier, his spouse and children up to N5.0m in aggregate. Amount payable is as in 2 and 3 above while damage to public utility is up to N10m and N35m for 3^rd party property.

Premium payable is dependent on the nature of the building, purpose of use, number of floors, number of occupants, etc. Sanction for non-compliance (the Occupier or property owner) is N100,000.00 fine and/or one (1) year imprisonment

5.              Motor Vehicle 3^rd Party Insurance

The policy is meant for all the owners of Motor Vehicles and Cycles licenced for road use to provide financial compensation for the commuters, passengers and other road-users in event o motor vehicle accident. It provides compensation as indicated below:

·        For Injury - Un-limited Amount

·        For Death - Un-limited Amount

·        For other Property  / Vehicle Damage - N1.0m

It provides cover for Injury and death to others from my motor accident, damage to other’s properties and other vehicles following my motor accident. It’s meant to benefit passengers in commercial vehicles who die or      are injured, pedestrians and other road users hit by motor vehicles, 3rd party vehicles and properties damaged in a motor accident and victims of hit and rum vehicles. Penalty for non-compliance is N250, 000.00 fine and/or 1 year imprisonment.

Ignorance is not an excuse. Most organizations and government agencies are demanding the inclusion of such policies in bid documents as a pre-qualification requirement. Note that insurance is a product you buy when you don’t need but becomes too late when the need arises. Know and demand your right!