NAICOM exploits court's rulings to enforce new premium policy

Chuks Udo Okonta

The National Insurance Commission (NAICOM) has identified court's rulings that would aid its legal strength to push the new premium regime, Inspen can reveal.

In a circular entitled Settle Court Case on partial/Instalmental/Non-payment of Insurance premium, signed by its management, the commission noted that the settled Appeal Court cases on the issue of insurance premium are clear indications that anything short of full payment at the commencement of an insurance contract renders such transaction null and viod ab initia.

It said the Provision of Section 50 (1) of the Insurance Act 2003 which states that, "The receipt of insurance premium shall be a condition precedent to a valid contract of insuran and there shall be no cover in respect of an insurance risk, unless the premium is paid in advance", is indeed in the interest of the insured going by decided cases on the issue by competent court of law.

It said: "Case1, the Court of Appeal in Ajaokuta Steel Co. Limited V. Corp. Insurance Limited (2004) 16 NWLR 369 at 373 held that: The foundamental purpose of an insurance contract is to give cover for an insurancerisk. Thus, a law, such as insurance Act, which says that there is no insurance cover unless premium was pre-paid, is in fact saying that the contract is viod if no premiium was paid.

"By virtue of Section 50(1) of the Insurance Act, No 2 of 1997 (as amended), the receipt of insurance premium is a condition precedent to a valid contract of insurance and there can be cover in respect of an insurance risk unless premium was paid in advance.

"Case 2, The Court held in Leadway Assurance Company Limited V. J.U.C. Limited (2005) 5NWLR 539 at 543 that: ... by virtue of Section 50(1) of Insurance Act, 1997, the receipt of an insurance premium is a condition precedent to a valid contract of insurance, and there is no cover in respect of an insurance risk unless premium is paid. In other words, a valid insurance contract is made when premium for the insurance is paid.

"Case 3, In IGI Company Limited V. Adogu (2010) INWLR pt 337 at 357 the Court held that the premium paid must be full and stated that: Section 50 of Insurance Act 2003 does not contemplate installment payment of premium in an insurance contract.

"The payment of premium is a condition precedent to a valid contract of insurance and when parties have entered into a conditional contract the condition precedent, like in the instant case, that is, the full payment of premium must happen before either party becomes bound by the contract."

The new premium regime has received the support of the government, as all ministries, departments, agencies and stakeholders have been adviced to ensure strict compliance.

NAICOM, in a bid to ensure that operators play according to the rules provided by the policy, has began having meetings with them.