With insurers’ recent threat that they will not give cover until government pays up the balance for last year and the premium for this year, the federal government group life assurance now hangs in the balance, Nnamdi Duru writes
The Pension Reform Act, 2004 directed insurance companies to hand off management of pension funds and opened a bigger business opportunity for them, making group life insurance for workers both in private and public sectors 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 the group life insurance for employees is that it is a guarantee that if a worker was unable to accumulate significant amount in his retirement savings account before he dies, his estate would still get something tangible up to at least three times his annual salary.
The amount would go a long way to relieve the pain associated with the loss of a breadwinner even as the employer is relieved of the burden of making additional ex-gratia payment to the estate of the deceased.
The Commissioner for Insurance, Mr. Fola Daniel, said each employer is expected to obtain an insurance certificate from the insurer accompanied with a schedule, giving full details of the employees covered, premium payable, and benefit payable.
"The employer must display it within its premises for the information of the employees and as an evidence of compliance with the law and send a copy of it to the National Pension Commission (PenCom) and the employees’ PFAs before the end of the first quarter of the year. An employer must not encumber the sums payable as death benefits or make any deductions from it," he warned.
In the event of death of an employee or that he is missing, the employer is required to inform his PFA and PenCom immediately.
‘No Premium No Cover’
The insurance regulator, National Insurance Commission (NAICOM), issued "Guidelines on Insurance Premium Collection and Remittances", signaling the end of providing insurance covers on credit and guiding both insurance brokers and underwriters on to go about collecting and remitting insurance premium to beneficiaries.
The guidelines directs as follows:
"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 insurer.
"Irrespective of the period of insurance, insurers shall ensure that at any point in time, they have received directly or indirectly through the insurance broker, the full premium in advance for the cover bring granted."
In the same manner, the guidelines provided that insurance brokers, lead underwriters and primary underwriters must notify insurers, co-insurers and reinsurers as the case may be of any premium collected on their behalf within two days of receiving such premium.
"All insurance brokers shall within 48 hours of receiving insurance premium on behalf of any insurer, notify the insurer in writing in each case, of the receipt of such insurance premium. All such notifications shall be accompanied by the broker’s credit notes acknowledging indebtedness to the insurer. An insurance broker who fails to notify the insurer of any premium received on his behalf shall be liable to a penalty of not less than N250,000 in each case of failure to notify," the commission directed.
"In consonance with the Insurance Act, 2003, there shall be no outstanding premium in the books of any insurer as covers granted on credit are not recognised by the law. In order to protect the interest of policyholders and other stakeholders from the negative consequences of the existing practice, insurance operators are required to comply with the following guidelines with effect of January 1, 2013," it stated.
Reviewing the new rule recently, the Vice Chairman of the Nigerian Insurers’ Association, Mr. Godwin Wiggle, said "the policy has paid off; I don’t know of any insurance company that complained about cash flow problems in the first quarter of this year. I think it has improved significantly, it has helped us to be more professional in the management of our resources and above all, it is really a signal that everything is possible if we are all committed to what we are doing."
Group Life Consortia
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.
According to a reliable source, 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 was appointed lead insurer for group life assurance scheme for workers in the Ministry of Mines, ARM life Assurance Limited, is now the lead insurer for workers in the Federal Ministries of Works and Power respectively.
Govt Premium Debt
Contrary to the expectations of insurance stakeholders, the federal government still owes premium debts notwithstanding the ongoing enforcement of the no premium no cover rule being championed by NAICOM.
Speaking on the extent of indebtedness of the federal government to insurers in the country, the President of the Nigerian Council of Registered Insurance Brokers (NCRIB), Mrs. Laide Osijo, said the failure on the part of government to honour its financial obligation to insurers was impacting negatively on the insurance business.
She said the premium payable for the group life assurance for federal government employees for last year was in excess of N3 billion, out of which the government has paid only N1 billion, translating to about 41 per cent of the premium for already expired cover.
"I want to appeal to the federal government for the release of outstanding premium on group life for the year 2012. As it stands, only 41 per cent of the premium has been paid remaining 59 per cent to be paid. Also, government is yet to pay any premium for the cover for year 2013 seven and half months into the year", she added.
Insuring on Credit
Insurance companies in the country are complaining that the federal government’s failure to pay premiums for its insurances as at when due constitutes a serious threat to the "No Premium No Cover" policy, which enforcement commenced January 1, 2013.
The operators, under the auspices of their umbrella body, Nigerian Insurers’ Association (NIA), have resolved that they will not provide group life assurance cover to the federal government on credit any more.
They were irked that seven and half months into the current year, government was yet to pay for the group life cover given its for last year in defiance of the no premium no cover policy which is still in force in the industry
Premium Debt Implications
Some of the implications of the premium debt owed by government include that employees of the federal government Ministries, Departments and Agencies (MDAs) are now worried over the fate of their Group Life Assurance (GLA) schemes for the current year now hangs on a balance.
They are worried that should anything happen to them, life insurers underwriting the schemes may not be able to pay their estates.
Speaking on the impact of government premium debt on insurance operation, Osijo said "this situation has made many insurance companies to discountenance claims under the year in review of the now existent ‘No Premium No Cover’. This, as we are all aware, is to the displeasure of some beneficiaries especially to those who died in active service.
"The impression many of them have is that the insurance industry is insensitive to their plights, a situation that creates serious image smear for the industry," she added.
Going forward, while life insurers put their acts together to ensure that the necessary capacity to underwrite the risk is in place and market the cover aggressively, government should obey the law and ensure that its workers are adequately protected by way of insurance.
It is in the interest of government to ensure its workers are covered for death or getting missing on the job because it costs more to pay death compensation.
Workers should also put more pressure on government to do the needful in order to ensure that their families get the best when the unexpected happens.
Source: Thisday
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