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Insuring Lives Of 2.6m Nigerian Civil Servants

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There is need for federal, states and private sector players to insure lives  of their respective workers through group life insurance cover. ZAKA ABD-KHALIQ writes

Despite the fact that Pension Reforms Act (PRA) 2014 mandates employers to buy Group Life Insurance Cover for their employees, the federal government as well as the 35 states of the federation are yet to procure group life insurance cover for about 2.6 million civil servants as at 31st of March, 2019.

While federal government has failed to renew group life insurance for its 89,000 workers since 2017, 35 states of the federation, boasting a total of about 2.5 million workers were guilty of not insuring the lives of their respective employees.

This, however, leaves Kaduna State and the Federal Capital Territory(FCT) as the only two states with life insurance coverage for their workers.

A document sourced from the National Pension Commission (PenCom) listed the defaulting states to include: Jigawa, Ogun, Delta, Zamfara, Kano, Imo, Kebbi, Sokoto, Ekiti, Kogi, Bayelsa, Nasarawa, Oyo, Akwa Ibom and Edo States.

Others are; Lagos, Niger, Osun, Rivers, Ondo, Benue, Kwara, Plateau, Cross Rivers, Anambra, Enugu, Abia, Ebonyi, Taraba, Bauchi, Borno, Gombe, Yobe and Adamawa States.

Investigation shows that, while Niger, Osun and Rivers states insured their workers last year, they are yet to renew in the current year, after it expired at the end of last year, thereby, finding their names on the list of defaulting states.

Market observers said non-adherence to insurance by these two tiers of government is exposing the families of over 2.6 million workers to imminent danger should anything happen to workers in the concerned states.

Currently, the families of the deceased civil servants in the current year within the 35 states are left to their own fate, as they are not entitled to death benefits claims, meant to sustain the bereaved after the death of their loved ones.

 

What Is Group Life?

In Nigeria, Group Life Assurance policy is compulsory by virtue of the Pension Reform Act 2004(repealed) and now PRA 2014. Section 9 subsection 3 of the Act requires employers to maintain life insurance policy or death-inservice benefit scheme in favour of their employees for a minimum of three times the annual total emolument of the employees. The policy provides cover to the insured against death.

 

Pricing Of Group Life Cover

The insurance industry regulator, the National Insurance Commission(NAICOM), had earlier mandated life insurers to comply with group life rate put at 6-8 per cent per mile, which was 300 per cent higher than market rate and operators were asked to comply with immediate effect.

However, enforcement of this rate, it was learnt, has now hiked up group life policy rate of government as well as private companies by 300 to 400 per cent. To this end, investigation revealed that the federal and state governments as well as private and multinational companies will have to comply to the new rate.

To this end, the chairman, Nigerian Insurers Association (NIA), Mr Tope Smart, said the new rates had empowered operators to charge between six and eight per cent per mile.

“This is 300 per cent higher than the formal market rate on group life. This is supposed to triple the premium income of life underwriters in 2019, thereby boosting total premium production,” he said.

Smart said that as at the time the rate was introduced in 2018, most of the group life businesses had been renewed, but that the development would not have much impact.

He said that the businesses would be renewed at the mandated rate in 2019 and this would translate to more premium income from group life.

“I believe operators can improve the profit margin of insurance industry if they charge the right rate on policies,” he said.

Mr Eddie Efekoha, president of Chartered Insurance Institute of Nigeria (CIIN), also said the institute was optimistic that the revived insurance rebranding campaign would attract more Nigerians to embrace insurance.

Efekoha said the campaign would liberate many Nigerians from financial illiteracy by encouraging them to take up insurance policies.

Managing director, LAKEG Insurance Consultancy, Mr Mufutau Oyegunle, on his part applauded NAICOM for the timely regulatory intervention on group life policy.

Oyegunle said, it was one of the best initiatives that was evolved by the industry regulator. He said the industry would equally benefit a lot in terms of improved premium growth if operators stuck to the prescribed rates.

“I am optimistic about that, a higher premium production will be turned up in 2019 because the major issue which is ‘rate cutting’ has been handled by the regulator by fixing the rates to be charged. I applaud the enforcement of rates on group life and third party and that to a large effect would boost Premium,” he said.

 

Experts Reactions

However, with PRA 2014 failing to prescribe sanctions for defaulters, state governments have cashed on this loophole by evading life insurance of their workers, especially, with some of them struggling to pay salaries of their respective employees.

LEADERSHIP Sunday investigations revealed that life insurance companies have visited some of the defaulting states to persuade them to buy group life cover for their employees, but it seems most of them are not ready to bear this financial responsibility.

Speaking in an interview with LEADERSHIP Sunday, director, Centre for Pension Right Advocacy(CPRA), Mr. Ivor Takor, charged the unions in public and private sectors to rise up to the plight of workers by compelling employers to insure the lives of their workers. While the labour unions are fighting for salary increment, he said, the pension and insurance packages of workers should also be utmost.

“It is now obvious to everybody that the state governors, among others, cannot do anything for the welfare of the workers unless they are compelled to do it. So, if the public sector unions don’t get up and ensure they implement these things, those states will not do anything,” he pointed out.

On his part, the president, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Shola Tinubu, said, employers must take up the responsibility of insuring their workers as this may also motivate employees to be dedicated to work.

Earlier, director-general, Nigerian Insurers Association (NIA), Mrs. Yetunde Ilori said, unfortunately, what the PRA 2014 prescribes is that any employer who fails to insure his employees under group life cover, should be a carrier of his own risk, hence, there is no compulsion.

This, she said, makes enforcement difficult, calling for a review of this section to make it compulsory on all employers of labour to put in place, group life cover for their workers.

While applauding PenCom for trying to enforce this provision through issuance of compliant certificates to complying employers as well as persuading federal government to make it one of the requirements to bid for federal government’s contracts, she said, different states have been approached by life insurance firms, but nothing much came out of this engagement.

According to her, “Yes, different states have been approached by life insurers, but the enforcement is not like that of the Contributory Pension Scheme (CPS), because it just says that where there is no group life put in place, should there be any death, such employer should take up the responsibilities. I think that is an aspect that should be reviewed.”

 

The Future

While experts agreed that it’s the duty of employers to buy group life cover for their respective staff, they called for a review to the group life section of the PRA 2014 to criminalize non-insurance of workers by employers while prescribing heavy sanctions for defaulting employers.

They also advised labour unions to impose it on players in the private and public sectors to have insurance cover for workers, while urging the concerned law enforcement agents on ensuring enforcement of this compulsory insurance product.

In the near future, Nigeria’s insurance industry is also expected to generate N60 billion from group life insurance in the current year.

The estimated amount would be generated through the enforcement of group life policy rate by the National Insurance Commission (NAICOM) which is expected to cost the federal, state governments and the private sector operators about N45 billion extra premium.

Market analysts confirmed that insurance industry has been generating about N15 billion income from group life annually in the past, but that the figure could increase by N45 billion, bringing the 2018 and 2019 expected premium income on group life to N60 billion.

 

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