This Day (Lagos)

30 April 2014

Nigeria: Govt Defaults On 'No Premium No Cover' Policy

Notwithstanding the standing rule which insists on full payment of insurance premium before the commencement of cover, the federal government has continued to insure the lives of its employees on credit.

The federal government, according to industry sources, is yet to pay the balance for the various group life assurance schemes for its workers for 2013 while the premium for the current year remains fully unpaid.

This is in negation of the "No Premium No Cover" principle which commenced across the country January 1, 2013.

The insurance regulator, National Insurance Commission (NAICOM) two years ago issued "Guidelines on Insurance Premium Collection and Remittances", signalling the end of the provision of insurance cover on credit and guiding both insurance brokers and underwriters on to go about collecting and remitting insurance premium to beneficiaries.

"All insurance covers shall only be provided on a strict 'no premium no cover' basis. Consequently, only cover for which payments have been recovered directly by the insurer or indirectly through a duly licensed insurance broker shall be recognisable as income in the books of the insurer.

"Any insurer who grants cover without having recovered premium in advance or premium receipt notifications from the relevant insurance broker shall be liable to a penalty on the sum of N500,000 in respect of each cover so granted and in addition, may be a ground for suspension of the license of the insure," NAICOM ruled.

The federal government has continued to observe this rule in reverse with life insurers and their umbrella body, the Nigerian Insurers Association (NIA) grumbling.

Even the insurance regulator, who is the adviser to the government on insurance related matters, seems to be helpless as it cannot sanction life insurers for providing group life cover to government on credit since its principal is the one breaking the rule.

This breach has continued to be a source of concern to stakeholders in the industry who are worried over the fate of the Group Life Assurance (GLA) schemes for employees of the Federal Government Ministries, Departments and Agencies (MDAs) in the current year.

Last year, insurance companies in the country, particularly life insurers underwriting federal government group life assurance schemes threatened to withdraw cover until government pays the outstanding premium for the previous year and the premium for last year.

As at July last year, outstanding premium for group life assurance for federal government employees was over N2 billion, industry sources confirmed. The condition that necessitated the threat has continued to this year, a worried operator said.

Still in breach of the no premium no cover policy, the federal government recently appointed various consortia of insurance companies to underwrite the group life assurance schemes for its employees in various MDAs.

Aiico Insurance Plc was appointed lead underwriter for the Nigeria Police account while the Industrial and General Insurance Plc IGI) is leading the para-military accounts respectively.

Capital Express Assurance Company Limited was appointed lead insurer for the group life assurance for workers in the Federal Ministry of Finance as well as for those in the Office of the Head of Service of the Federation (OHOSF) and the Office of the Secretary to the Federal Government (SGF) respectively.

Also, African Alliance Insurance Company Limited was appointed lead underwriter for workers in the Ministry of Defence and their colleagues in the Police Service Commission respectively.

While Mutual Benefits Assurance Plc (MBA) was appointed lead insurer for group life assurance scheme for workers in the Ministry of Mines, ARM life Assurance Limited, is lead insurer for workers in the Federal Ministries of Works and Power respectively.

The Pension Reform Act, 2004 made group life assurance for workers both in private and public sectors at the expense of their respective employers compulsory. Section 9 (3) of the Act states that every employer must "maintain life insurance policy in favour of the employee for a minimum of three times the annual total emolument of the employee."

The major advantage of group life assurance is that it guarantees that if a worker is unable to accumulate significant amount in his retirement savings account before he dies, his estate would still get something tangible up to at least 3 times his annual salary.

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