Compulsory Builders' Insurance: Insurers Lose N50bn in Five Years

Commissioner for Insurance, Mr Fola Daniel

Ebere Nwoji ThisDay

The insurance industry has lost about N50 billion in the past five years to non- implementation and non-enforcement of compulsory insurance of public buildings and buildings under construction.

The industry however said it achieved 92 per cent increase in the quantum of premium written in other compulsory insurances between the period 2009 and 2012 having grown the premium figure in this line of business from N14.93 billion to N28.68 billion within the period.

Compulsory insurances are those classes of insurance made compulsory by law, with the objective of providing protection to third parties and the general public.

They include Builders Liability insurance under the Insurance Act 2003/under the Lagos State Building Control Law 2010;
Occupiers Liability under the Insurance Act 2003 and Lagos State Law Employers Liability (Group Life) – under the Pension Reform Act 2004;
Employers Liability under the Workmen’s Compensation Act 1987; Healthcare Professional Indemnity under the NHIS Act 1999
and Motor 3rd Party Liability under the Insurance Act 2003.

Campaigns on enforcement of these classes of insurance were carried out by NAICOM in six geopolitical zones of the country while campaign on implementation of the compulsory insurance of public buildings and buildings under construction was specially flagged off by NAICOM in June 2010.

During the exercise, insurers had raised hopes on the ability of the insurance on public building and building under construction to geometrically raise their premium income, which has over the years remained low.

They had projected that if well implemented, the insurance of public buildings and buildings under construction would yield minimum of N10 billion annually to the premium generated by the industry.

Both Chairman Niger Insurance Plc Alhaji Bala Zakariya' u and the then chairman Nigeria Insurers Assocation(NIA) Mr. Wole Oshin,  who commented on this said achievement of the above figure from the builders liability class of business was possible.

Also the Commissioner for Insurance, Mr Fola Daniel, shortly after the campaign told journalists that his projection of raising the industry's premium from N240billion to a trillion Naira margin under the industry's Market Development and Restructuring Initiative (MDRI) was based on the hope that with the campaign, if 1000 buildings were insured in a year, it will be enough to transform the fortunes of the industry.

But five years down the line, insurers said they have lost huge premium to non enforcement and non implementation of this particular class of business .

Commenting on the underwriter's experience in the business Mr Godwin Wiggle, current Chairman, NIA and Managing Director Linkage Assurance Plc said achieving the above figure would have been possible if the enforcement of the compulsory builders insurance was done properly by the government.

He said, but for problem of non enforcement and unawareness, the industry would have fared better in the face of the compulsory builders' insurance.

He said as a result of the non implementation of the policy, public compliance and patronage has been very low as he called on government to consider the use of law enforcement agents.

Managing Director Risk Analyst Insurance Brokers and former Managing Director Cornerstone Insurance Plc, Mrs Funmi Babington- Ashaye  said the insurance of building and building under construction was a god policy that would have yielded to the industry premium above the projected figure but that Nigerians are not yet complying with the law on purchase of the policy.

She said a close look at the number of building collapses happening in the country would testify to this.

According to her, both government and the insurers should wake up to the responsibility of ensuring that the policy begins to gain the desired patronage.

She said, on the part of the government, purchase of the policy should be attached as condition for approval of building plan in all parts of the country while the insurers should stage enlightenment campaign in all parts of the country where houses are built.

She said if this is done, the policy would yield the desired premium for the industry.

She advised NAICOM to liaise with government agency in charge of building plan approval on how they can collaborate to ensure that Nigerians regard and patronise the industry through the policy.

But at the 2015 insurance seminar for journalists held in Benin, Edo State, Daniel had hinted that the federal government would soon mandate all those seeking for government contracts to present their compulsory insurance certificates as one of the criteria for qualifying to apply for such contracts.

Daniel said this was a way government wishes to achieve its target of positioning insurance as the pillar of the nation's economy as well as a way of enforcing the five compulsory insurances launched five years back under its MDRI initiative.

He said contrary to expectation by insurance industry operators and stakeholders that government would use the various law enforcement agents like the Police, the vehicle inspection officers (VIO), the road safety commission among others to compel people to buy the compulsory insurances,it will rather attach it to contract applications and award pending the time Nigerians Would be financially literate enough to understand and appreciate the benefit of insurance and willingly patronise the industry.

" The industry operators want us to use law enforcement agents on the offenders but I don't think we will do that. We can't do that because to prosecute these offenders, we need to obtain the fiat of attorney general. and that is another tall order.The Attorney General's office is immensely busy and for parastatals seeking fiat here and there, it may be a tall order. So the honorable minister said, is there anything the government can do and I made one or two suggestions one of which she has accepted.

Protocol will not allow me to preempt what government wants to do. But what government is poised to do will be as effective as what the government did to enforce the group life assurance. You know no body is buying group life assurance voluntarily except government .the private sector, the contractors some multi mega contractors you want to do government business you have to show evidence",  he stated.