Federal Government, Thursday, revealed that Ministries, Departments and Agencies, MDAs, owe insurance companies N24 billion in unpaid premiums as at January 2013.
In a circular to the Chief of Staffs to the President and Vice President and heads of government parastatals, titled, 'Guidelines on insurance premium collection and remittances -- compliance with Section 50 (1) of the Insurance Act,' Mr. Yerima Ngama, Minister of State for Finance, said the indebtedness, in spite of the yearly budgetary provisions for insurance, is unacceptable.
He said the refusal of the MDAs and other stakeholders to pay their premiums is affecting the insurance companies negatively, making it impossible for the insurance firms to meet their various claims obligations under contracts of insurance to eligible beneficiaries.
He, therefore, directed the MDAs and other stakeholders involved to immediately begin payment of the premiums in line with the act, adding that sanctions will be meted out for non-compliance.
Henceforth, according to him, any contract of insurance entered into without payment of full premium in advance shall be legally unenforceable.
He said, "In furtherance of the ministry's resolve to end the menace and era of non-remittance of insurance collections and premiums as well as consolidate the gains of the on-going efforts in sanitizing the insurance industry, the National Insurance Commission, NAICOM, has issued guidelines on insurance premium collection and remittance compliance in accordance with the provision of Section 50 (1} of the Insurance Act 2003."
"Arising from the observed non-compliance by Ministries, Departments and Agencies (MDAs) and other critical stakeholders in the insurance industry, the ability of insurance companies to meet their various claims obligations under contracts of insurance to eligible beneficiaries has been grossly undermined.
"It is on record that the total premium debts owed the Insurance companies by MDAs as at January, 2012 is N24 Billion in spite of yearly budgetary provisions for insurance.
"Consequently, MDAs and other stakeholders are by this Circular directed and advised to comply with the provisions of the above Act, as any MDAs/Organization found culpable would be sanctioned accordingly.
"To this end, all MDAs and other stakeholders are enjoined to render their returns on premium collection and remittances to the National Insurance Commission (NAICOM) as enshrined in the guidelines.
"In addition, it is worthwhile to note that henceforth, any contract of insurance entered into without payment of full premium in advance shall be legally unenforceable.
"It is expected that the enforcement of this provision' of the law will strengthen insurance companies' ability to meet claims obligations under contracts of insurance."
Mr. Fola Daniel, Commissioner of Insurance, NAICOM, had declared that the new insurance policy that premium payment must be up-to-date before claims could be paid also applies to MDAs and all stakeholders in the public or private sector.
According to him, under the implementation of the provisions of Section 50 (1) of the Insurance Act 2003, "the receipt of insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk unless the premium is paid in advance."
He said, "The policy applies to all. Those who default in payment of premium cannot enjoy claims. It does not work like that. In the past there were issues of people making claims even when they were not up-to-date in their payment of premiums.
"In fact in the next one week or so, we will issue a circular to all governments organization on the application of the new policy. Some people have raised concerns how government agencies can make premium payments regularly and completely at the beginning of each year but we are sure they can work round it by making available or setting such funds aside early enough in order not to default."