Tuesday 25 November 2014

PRA 2014: Insurers may lose group life business


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Chuks Udo Okonta

The word ‘The solution to a problem is a problem’ can be best used to describe the provision on Sec 4(6) of the Pension Reform Act (PRA) 2014, which has put the group life assurance at the discretion of employers, a development that is presently causing apprehension  among insurers.

Although Sec 4(5) of PRA 2014, mandated every employers to have group life insurance policy in favour of each employee, Sec 4(6) PRA 2014 which reads: “Where the employer failed, refused or omitted to make payment as at when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period” seem to have created a window for employers to do away with insurers and carter for the settlement of their employees after their death.  

Experts, who have observed the gap, said the provision on Sec 4(6) PRA 2014 is a great threat to group life business as some employers may hind under it to do away with insurers and make arrangement for their staff after their demise.

They said the provision Sec 4(5) of PRA 2014 would have been left to stand with no exception created Sec 4(6) PRA 2014.

They expressed worry over the continuous loss of insurance businesses, adding that if adequate measure is not taken, group life which has been a major chunk of insurance business and yields good premium to the industry may be taken away, as crafty employers may take advantage of the gap.    

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