The effective compliance by the Federal Government and medium sized oil firms with the provisions of the amended Pension Reform Act of 2014 have boosted the nation’s life insurance market with 35 percent annual growth in the last three years, BusinessDay investigations have shown.
Also, renewed interest in annuity, which guarantees lifetime payment, as against programmed withdrawal with specific period of payment by retirees, has been identified as a contributory factor to the growth of the life business, projected at about N105 billion at end of 2013, from N78 billion in 2012.
The implication is that group life insurance is set to boost the revenue of the industry, as more organisations embrace the scheme, which seems to enhance the welfare of workers.
In the last three years, annual group life insurance of public sector workers from the office of the head of service of the federation annually has been in the neighbourhood of N6 billion and N7 billion, constituting a significant contribution of the life business to total industry premium figure.
Annuity on the other hand, has moved from less than five percent of retirees retirement benefit in 2007, to about 20 percent, while programmed withdrawal, managed by Pension Fund Administrators (PFAs) currently stands at 70 percent of total retirement benefits.
Teju Ogunjimi, managing director, ARM Life, said the commitment of the federal government to the provision of group life insurance cover for its workers has added increased value to life business, and would become more significant when most of the states comply.
“Medium-sized oil firms are compulsorily providing group life for their workers, as a precondition to bidding for contracts from major oil companies and the Nigerian National Petroleum Corporation (NNPC) and I think this is increasing the demand for life business in that sector”, Ogunjimi said.
“Though we cannot quantify in real terms what the contribution of life business is to total premium figure for 2013 yet, because only just about 20 percent of the companies have gotten approval of their annual accounts, but by the end of September, more than half would have gotten approval and we can be specific on what the actual contribution is”, Ogunjimi said.
Chike Mokwunye, group managing director, Royal Exchange plc, said insurance industry growth in Nigeria and across Africa is largely driven by life, credit insurance and health products, as against what comes from general business.
Mokwunye observed that the drive was coming as a result of regulatory enforcement, which has made certain life covers, such as group life insurance and health insurance compulsory for employers, as part of the welfare package for their employees.
“For us at Royal Exchange, our life business is growing at about 115 percent annually, while general business is growing at between 11-15 percent, and is cuts across the market. We see more growth coming in these areas in the near future, as players engage in more research for innovative products that meet consumers needs and are made easily accessible”.
Section 9 (3) of the Pension Reform Act stipulates that every employer to which the Act applies must maintain Life Insurance Policies in favour of employees, for a minimum of three times the annual total emolument of the employee. Under the policy, total annual emolument is defined as the basic salary, transport and housing allowances and shall not include bonuses, overtime, directors’ fees or other fluctuating emoluments.
According to the guidelines for life insurance policies for employees, jointly issued by the National Insurance Commission (NAICOM) and the National Pension Commission (PenCom), the employer is required to fully bear all costs in relation to procurement of this policy, and this shall be in addition to the contributions to be made by the employer, to each employee’s Retirement Savings Account.
The policy provides cover to the insured against death, and the insurance cover is mandatory for all employees, as long as they are in employment. This means that the policy provides for the payment of the sum assured, in the event of the death of a member of the scheme from any cause, natural or accidental.
Annuity on the other hand is a series of fixed payments made at regular intervals over the specified period of the annuity purchased by a retiree from his pension emoluments. As provided in the Pension Reform Act 2004, a retirement Savings Account (RSA) holder may upon retirement or attaining the age of 50 years (whichever is later), purchase an annuity from a life insurance company licensed by NAICOM with monthly or quarterly payments.
Modestus Anaesoronye
No comments:
Post a Comment