From Okwe Obi, Abuja
An insurance firm, Transparent Protection Limited (TPL), has backed the National Insurance Commission (NAICOM) for increasing the new Motor Insurance Premium Rate policy.
TPL Director, Sam Chukwuka Onyeka, at a press briefing yesterday in Abuja, argued that the initiative would curb fake insurance policy and enable insurance firms pay clients claims on time.
NAICOM had issued a circular dated 22nd December, 2022, with No: NAICOM/DPR/CIR/46/202, which read: “Pursuant to the exercise of its function of approving rates insurance premium under section 7of NAICOM Act 1997 and other extant Laws, the Commission hereby issue this circular on the new Insurance Premium rates effective from 1st January, 2023:
“Third Party Insurance policies inclusive of ECOWAS Brown Card (EBC) shall be as follows; Private motors N3,000, new premium 15,000, own goods new rate N20,000, staff bus N20,000, trucks/general cartage, 100,000; special types N20,000; tricycle N5,000; motor cycle N3,000.
“Comprehensive motor insurance policy premium rate shall not be less than five percent (5%) of the Sum insured after all rebates/discounts.”
Onyeka added that if he had his ways, the premium would have been hiked beyond the new rate in order to strengthen the insurance sector.
“When we consider that the motor vehicle will be used where other road users also have right of access, there is a possibility that there will be accident which could lead to death or body injury or even damage to third party property.
“It becomes the responsibility of the company to ensure that whoever uses the vehicle on the road has the capacity to take responsibility financially for any loss that may happen by use of the vehicle.
“Now there are two ways; it is either you compel the people or individuals to make a deposit somewhere or they take over an insurance. And government, in its wisdom decided to use insurance.
“Although, there is the possibility of exception. If you look at the Motor Vehicle Third Party Insurance Act of 1945, Section 3 specifically says that no person is allowed to use or authorise to use a motor vehicle on the road without having in place a policy insurance. And it is a crime not to comply with provision section 3.1.
“The responsibility to fix rate for third party insurance is that of the National Insurance Commission (NAICOM) as a regulator of insurance business in Nigeria and they derive this power under the National Insurance Commission Act of 1997.
“Now acting under this power, sometimes in 2000, the Commission fixed a rate of N5,000 as a premium for third party insurance cover.
“That rate has been there for mover than 23 years now. It was cherry to hear that NAICOM decided to increase that rate in December. NIACOM moved from N5,000 to N15,000 in relation to private motor vehicle.
“Many people are complaining because having regard to the current economic condition, they believe that it is not the time to make such increase.
“But we have a responsibility to explain the pros and cons so that we can understand where we are going. Now there is jurisdiction in the world where property insurance is sold for N5,000.
“This is very important for us to understand. The reason we have not had insurance company settling claims in relation to third party policy is because there is no fund to settle the claim.
“The business of insurance is designed in such a way that insurer collects premium and settles claim out of the premium he has collected.
“And in calculating premium, you will have what is called risk premium, administration charge and margins and profits,” he said.
He continued: “What has happened is that NAICOM had improve what we have. The third party property damage age limit has been extended. It is no longer N1 million. It is now N3 and N5 million respectively. It can also be more.
“We have what is called ECOWAS brown card cover. What it means is that all the companies that are members of the ECOWAS belong to a union and so you can move from Nigeria to Ghana Ivory coast driving your call without anybody harassing you.
“All you need is to have the ECOWAS brown card protection. This protection is also part of what is in the N15, 000 third party insurance rate.
“You can see that it is a win-win situation for everybody. So you do not need to have a third party policy first then when you want to travel abroad with your car you go and get ECOWAS brown card separately.
“That is how it is for every jurisdiction. Ideally, if I am the one fixing the rate, I will go for more N20,000 because anything less that N20,000 will not make sense.
“But having regard for all the circumstances of the day, there is no way we could have gone beyond N15,000. We think that what NAICOM has done is a step in the right direction.
“We also believe very strongly that this will enable curb fake insurance because when insurance companies are not ready to settle claims because they do not have money to settle claims.
“But when insurance companies begin to take responsibilities to issue policies which they know that they are going to settle claims and which NAICOM is ready to enforce then it will make it easy for us to stamp out fake insurance policy.”