PAPER
DELIVERED AT THE NIGERIAN COUNCIL OF REGISTERED INSURANCE BROKERS FEBRUARY 2014
MEMBERS EVENING
Tuesday 18th February
2014
T A Braithwaite Events Centre
Insurance Brokers House
58, Moleye Street
Alagomeji, Yaba, Lagos.
PROTOCOL
The
President/Chairman-in-Council of The Nigerian Council of Registered Insurance
Brokers, Members of the Governing Council here present, CEO’s of Brokerage
firms, Members of the Council, Gentlemen of the Press, Distinguished Ladies and
Gentlemen.
Let me express the
appreciation of my Company to the President and the Executive of the Council
for the partnership of this event. Niger
Insurance Plc is noted for its great respect for the Brokerage industry and
shall continue to nurture this relationship for the betterment of the Industry.
Let me also seize
this opportunity to appreciate the leadership and entire members of NCRIB on
this edifice. It is a testimony of how
well the industry has come. And to the
brand new President, I say congratulations once again, on your ascension of the
mantle of leadership. May the Lord grant
you the wisdom and good health to make a difference.
This evening, I
wish to share my thoughts on the challenges of insurance of public buildings.
In doing this, I shall be looking at the scope of the Act, the optimism of
business generation, the reality of implementation and its challenges, and my
view as regards the way forward.
The essence of this
discussion is to elicit more views which at the end of the day should assist
the regulator and the industry to come up with a position that would assist in
achieving a common objective.
SCOPE
OF PUBLIC BUILDING INSURANCE
The Insurance Act
of 2003 made provisions for a number of compulsory insurances amongst which is
the insurance of public buildings. Section 65 of the said Act provides thus:
“Every public building shall be insured with a
registered insurer against the hazards of collapse,
fire, earthquake, storm and flood”
The Act defines public buildings as including:
a. Tenement
house
b. Hostel
c. Building
occupied by a tenant, lodger or licensee
d. Building
where the public have ingress and aggress for the purpose of obtaining
educational or medical services or recreation or transaction of business. This
would include eateries, restaurants, internet cafes, shopping malls etc.
Note: The Lagos State Building Control Law of 2010
also defines a public building as any building which is not used 100% by the
owner for residential purposes.
The Act further
identifies possible insured which could be either the owner or occupier of premises. The risks which should be
covered under this insurance include:
a. Loss
or damage to property
b. Injury
and death suffered by any user of the premises or third parties.
Punishment for non-compliance with this
provision is stated as either a fine of N100,000 and/or imprisonment of one
year.
For a better
understanding of this provision, it is worthy to mention that the risks covered
under the public building insurance is similar to those covered under a
standard fire policy. The difference being that the fire policy does not cover
the risk of spontaneous collapse. The form of collapse covered under the
standard fire policy is collapse as a direct result of fire, earthquake,
etc. Therefore, the insurance of public
buildings is different from a standard fire policy and therefore risk factors
to be considered in the former exceeds those of the latter. For public building insurance, the mode and
quality of the building vis-a-vis the probability of collapse is an essential
factor.
On the face of it,
this provision should provide a lot of benefits to Nigerians taking into
cognisance the incessant collapse of buildings nationwide especially in Lagos
State. This is often accompanied by fatal consequences together with human and
material losses. Likewise, incidences of flooding recorded in Lagos, Ibadan and
some other parts of the country. Insurance of public buildings is meant to
provide an avenue for compensation to third parties and users of damaged
properties. As with all compulsory insurances, it provides a socio-economic
function in the society. However, despite all efforts by the National Insurance
Commission (NAICOM), the regulatory authority saddled with the implementation
of the Act including the launching of the Market Development and Restructuring
Initiative (MDRI), not much has been achieved in the implementation or
enforcement of this provision. This confirms the opinion of experts on
compulsory insurance that it should be restricted to areas where a need is
generally felt and in sectors where supervision is possible at a reasonable
cost.
Nevertheless, it is
important to stress that problems associated with the insurance of public
buildings cannot be divorced from the general problems of the Nigerian
Insurance Industry, though some peculiar challenges are identified.
NAICOM, in its
Corporate Strategic Plan 2011-2015’ (pg. 21) had listed ‘poor compliance culture’, ‘inadequate
legislative and legal framework’, ‘poor public perception of NAICOM as a
regulator’ and ‘public resistance to insurance’ as threats to the industry.
Therefore, the challenges which I would like to address at this forum are
basically the following: ineffective legal framework, poor compliance culture,
lack of awareness on the part of the public, and finally, ineffective
implementation of strategy adopted by NAICOM.
INEFFECTIVE
LEGISLATIVE FRAMEWORK
Generally, the
legislative framework for insurance practice in Nigeria is inadequate and
ineffective. Often times we find the law making unenforceable provisions which
though good on paper is almost impracticable without strong enforcement
provisions. The law makes provisions for NAICOM to enforce the insurance laws
against insurance companies through the inspectorate division in the Commission
but provides no means of enforcement against the public in general. The
Commission has no power of arrest irrespective of the fact that there are
sanctions provided in law. How would arrest and legal action be taken to ensure
sanctions are meted out to individuals in breach of the law?
It is pertinent to
note that before the Insurance Act of 2003, there were compulsory insurances in
place such as the third party motor insurance and the workmen compensation
policy (now abolished). They had separate enactment for them such as the Motor
Vehicle (Third Party Insurance) Act 1945 and the Workmen’s Compensation Act of
1990.
In the case of the
compulsory third party Section 17 Motor Vehicle (Third Party Insurance) Act,
police officers are empowered to ask anyone driving a motor vehicle to produce
his/her certificate of insurance. Similarly, Section 40 of the Workmen’s
Compensation Act gave the minister of labour power to enforce the compulsory
insurance provisions of the Act. This position was reinforced in the Insurance
Act of 2003. Therefore, the police force and the ministry of labour ensured
compliance with these provisions respectively.
Unlike the above
two, there is no separate enactment for compulsory insurance of public
buildings. This inadequate legal framework makes it completely difficult to
enforce the provision considering the fact that legal provisions on compulsory
insurances have never been enforced against the public by NAICOM or any regulatory
body at their inception.
Consequently,
rather than have new compulsory insurances such as for buildings under
construction, occupier’s liability, and insurances of public buildings lumped
under the Insurance Act, it would have been more pragmatic to have a separate
Act of parliament for each and every one of them. Each of these Acts would then
provide relevant enforcement agencies though the benefits on the long run
accrue to the insurance industry in form of increasing patronage and growth. In the case of the
insurance of public buildings, all States physical planning authorities should
be empowered to enforce the provisions of the Act.
It is equally
important to note that the provisions for insurance of public buildings even as
they are in the Insurance Act are quite confusing. The law provides that either
the owner or the occupier of the premises can insure public buildings. The
policy is meant to cover legal liabilities of either owner or occupier. At what
point in time does the occupier have legal liabilities or insurable interest in
the building he or she is occupying? This is considering the fact that where
the tenancy agreement does not transfer liability of collapse or damage to the
tenant, insurable interest may not exist on the part of the occupier.
Similarly, an occupier of a building may not be the legal tenants. Also, where
there are multiple tenants, e.g. in a multi-storey building where we have a
hospital, a restaurant and hostel on different floors, how would liability or
insurable interest be determined among the tenants.
It is common
knowledge that the principles of insurable interest and indemnity are important
aspects of a valid insurance contract. No one can insure a building for which
it has no insurable interest i.e. a financial relationship recognised at law.
Similarly, indemnity is often dependent on the level of insurable interest an
insured has in a building. More legal clarification would be required to ensure
that a chaotic situation does not arise in the implementation of the provision
on insurance of public building.
POOR
COMPLIANCE CULTURE
The Act came up
with good intention and introduced penalties for non-compliance but created a
gap as regards enforcement. The
implication is that in an environment where insurance is not too popular,
coupled with low level of disposable income, it becomes very difficult to
realise the objectives of the Act.
INEFFECTIVE
IMPLEMENTATION STRATEGY BY NAICOM
As earlier noted,
there are no enforcement provisions for NAICOM regarding the insurance of
public buildings. However, NAICOM did make attempts at implementation which is
quite commendable despite the inadequacies of the provision. These involved
advertisement and awareness creation programs in all the geographical zones of
the country. It also included mobilizing, training and sensitisation of
relevant agencies such as the fire service and the police force. Members of the Insurance Consumers
Association of Nigeria (INSCAN) were also involved. Fliers conveying
information on the product and the benefits available were also distributed.
All these efforts
cost a lot of money but did not yield positive results. It may have been more
beneficial to use persuasive approach through the registered associations of
businesses which the law listed as requiring insurance of public buildings.
These are associations of businesses offering medical services, educational
services or recreation services. It could also involve landlord associations in
various communities. These associations
would be a more effective and efficient means of reaching out to these
individuals and businesses about the requirement of law and the implications of
a breach. NAICOM can through this means hold talks or seminars on how to comply
and possibly facilitate a platform for cooperation between insurers and these
various groups and businesses. This would ultimately help secure more insurance
penetration in other sectors of the economy and possible market and product
development for different segments of the insurance market.
In conclusion
however, the practise of compulsory property insurance or insurance of public
building is not wide spread in the world so it is innovative and therefore, may
require innovative steps in order to accomplish its objectives.
Countries that have
followed in Nigeria’s steps include Ghana through its Insurance Act of 2006.
However, its
experiences do not differ from that of Nigeria. Nevertheless, a few lessons
could be learnt from Ghana. There, consultations were made with reinsurance and
insurance companies which led to the adjustment of policy wordings of a
standard fire policy to accommodate the provisions of the law. The Ghanaian
National Insurance Commission (NIC) also set the limit on third party
liabilities in respect of this cover. While not campaigning for the adoption of
Ghanaian methods, it may be worthwhile to consider their experiences in finding
a solution to the challenges of insurance ob public buildings business here in
Nigeria. On the other hand, Kenya is also proposing this law!
The Korean
situation is also worthy of note. Here the law differentiates between legal
liabilities of the owner and the tenant. The liability for fire is placed on
the tenant while that of bodily injury and death is placed on the owner of the
building.
In view of the
above, a multi-dimensional approach would be necessary for the resolution of
challenges associated with the insurance of public buildings.
THE
ROLE OF NIGER INSURANCE PLC
Mr. President,
Niger Insurance Plc, is willing to partner with key stakeholders like NAICOM
and NCRIB in addressing the challenges enumerated above and ensuring the
workability of the policy all with the aim of creating a better business
prospect for the industry.
We have
continuously worked on our service delivery mechanism, improved our ICT process
that makes business interaction seamless between us, brokers and customers,
while enhancing the manpower capacity of our personnel, all with the primary
purpose of fulfilling our vision of becoming the insurance Company of first
choice.
The
President/Chairman-In-Council, distinguished brokers in the house, gentlemen of
the press, ladies and gentlemen. What I
have attempted to do is to share my thought on this very important aspect of
the business that holds so much opportunity for the industry but is being
affected by systemic issues that need to be resolved if we are all to
benefit. I hope all stakeholders, i.e.
the insurance industry, the legislature, the building industry and the general
public will work together in order to make this policy work.
THANK
YOU FOR YOUR ATTENTION!
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