Group Life Insurance - Pension Act Makes Defaulting Employers Liable

By Sola Alabadan

The Pension Reform Act 2014 has made defaulting employers liable for claims arising from the death of their employees should they fail to arrange the compulsory group life insurance cover for their employees.

Section 4(5) of the new Pension Act stipulates that "In addition to the rates specified in subsection (1) of this section, every employer shall maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.

It was expressly stated in subsection (6) of the same section that "Where the employer failed, refused or omitted to make payment as and 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."

This new provision of the law which makes employers liable for the payment of claims arising from the death of their employees for failing to arrange life insurance for employees, was not included in the repealed Pension Reform Act 2004.

Daily Independent had reported that for year 2012, it was only in the month of November 2012 that the Federal Government paid 41 per cent of the group life insurance premium to the affected insurance companies. The remaining 59 per cent was not paid.

Again, majority of the employers in the private sector have not been arranging this life insurance cover for their employees in contravention of the law.

In line with the guidelines for life insurance policy for employees jointly issued by the National Insurance Commission (NAICOM) and National Pension Commission, the employer is required to fully bear all costs in relation to procurement of this policy.

The life insurance policy must be purchased from a life insurance company licensed by NAICOM under the Insurance Act 2003.

The policy provides cover to the insured against death.

Insurance coverage shall be for 12 months, from January through December, and shall be renewable at the end of each coverage year.

Besides, each employer is required to obtain an insurance certificate from the insurer and display a copy of the insurance certificate in a conspicuous place within the premises, for the information of the employees, as evidence of having taken such policies.

Source Daily Indepedent