Although, the third party motor insurance policy has been hiked from N5,000 to N15,000, it also leads to N2 million increase on maximum claims limit for each beneficiary (vehicle) of this policy, LEADERSHIP can exclusively reveal.
Initially, when the policy was being sold at N5,000, the maximum claims limit was N1 million, however, with 200 percentage increase in premium, it also shoot up the claims limit for vehicle to N3 million, translating to N2 million growth, while it is even N5 million maximum claims for goods vehicles and staff buses.
Moreover, the claims for loss of life in an accident to a third party is limitless, hence, making the new rate regime more attractive than the previous regime.
The New Rate Regime
In December, 2022, the National Insurance Commission (NAICOM) had issued a circular reviewing rates for Motor Insurance effective January 1, 2023, hence, raising the rate by 200 per cent from N5,000 to N15,000, attributing the new rates to hike in inflation rate, even though, the existing rate has being in use for about 19 years.
The circular titled: ‘The New Premium Rate for Motor Insurance’ with reference number NAICOM/DPR/CIR/46/2022 signed by the director, Policy & Regulations, Mr Leo Akah, disclosed that, “in pursuant to its function of approving premium rate of insurance companies under Section 7 of NAICOM Act 1997, and other extant laws, the Commission hereby issue this circular on the new motor insurance premium rate effective from January 1, 2023.”
To this end, the insurance industry regulatory body said, the Third Party Property Damage (TPPD), which is the limit of claims an insured can enjoy on the policy, noted that, TPPD on private vehicle is now N3 million; Goods vehicle and staff bus goes for N5 million, even as trucks/general cartage will now have maximum Claims limit of N3 million; tricycle N3 million and N1 million for motorcycle.
Meanwhile, NAICOM said: “the new motor insurance premium rate increase third party motor insurance to N15, 000 for private, while commercial is N20, 000. Goods and staff busses are to pay N20,000 while truck pays N100,000 even as tricycle has been mandated to pay N5,000 and motorcycle goes for N3,000.”
Benefits of Claims Increase On Motorists
Motorists seems to enjoy better package under the new rate regime, especially, considering the fact that vehicle parts have so much witnessed price hike in recent time of which the previous N1 million TPPD is not enough to repair a 2020 Lexus vehicle and its equivalent.
Market observers believe the new maximum claims limit of N3 million on vehicle is considerate looking at the current market price for vehicle and its parts.
Speaking at a press conference to kickstart campaign on new premium rates for motor insurances, in Victoria Island, Lagos recently, the chairman of Publicity Sub-Committee of the Insurers Committee, Mr. Akinjide Orimolade, noted that, in last 19 years or so when the old rate had existed, the price of everything else has change except for insurance, at a time the replacement cost for damaged vehicles has increased, the price of vehicle parts has risen over time owing to the development in the forex market and inflation.
Orimolade, who is also the managing director/CEO of the Stanbic IBTC Insurance, noted that, the Insurers Committee through its Publicity subcommittee decided to embark on a campaign to shed more light on the new rates and generally improve insurance uptake among the citizens, specifically, emphasising the maximum claims limit which has equally increased to the benefits of motorists.
Earlier, the deputy president, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr. Tunde Oguntade had said, the new premium and claims regime is one of the best things to have happened recently in the insurance industry as it would help address the soaring cost of repairing vehicles.
He implored motorists to consider the value created by the new regime which moved claims limit from N1 million to N3 million for private third vehicles and N5 million for commercial, stressing that, it has been difficult to repair most vehicles with N1 million owing to the high cost of spare parts.
Similarly, the national vice president, Association of Registered Insurance Agents of Nigeria (ARIAN), Kehinde Jegede, sees the introduction of new premium for auto insurance as a development that would aid better service and improvement of claim settlement for motor insurance policyholders.
He noted that, with the new rate and NAICOM’s monitoring, all the stakeholders shall have fair sharing, adding that, motorists with genuine policy shall have access to timely indemnity, as confident of the public on insurance will be reassured.
The new premium regime, he said, does give room for better service, while members of the public shall be better served with the new introduction of premium rates and regulations.
In the same vein, the head, Corporate Communications and Market Development, the National Insurance Commission (NAICOM) ‘Rasaaq Salami said, the aim of the industry in kickstarting awareness campaign on the new rate is to sensitise the motoring public on the importance of procuring motor insurance policy, especially, 3rd party motor cover, despite the rate increase and focus more on maximum claims limit that equally surged by 200 per cent.
Stating that increase in TPPD of N3 million is to the benefits of the motoring public, adding that, the market report on acceptability of the new motor rate is positive, although, it could be better with increased awareness on its benefits.
Meanwhile, the chairman, the Compassionate Farms, Mr. Fatal Adegbenro, said the new development is critical to the growth and development of the insurance industry as both operators and policyholders would benefit immensely from such rate increase.
Adegbenro, who was the former executive secretary/CEO, NCRIB, disclosed that, the costs of vehicles and repairs have gone up astronomically as a result of inflation, hence, the need to have higher limits for third party liability.
Stressing that, the new rate adjustment and implementation remains one of the primary responsibilities of NAICOM to protect the policyholders and the public that may suffer loss or damage, he appealed to motorists to cooperate with the regulator for the betterment of all.
To him, “it is a step in the right direction that everyone should embrace and support. If a motorist who cannot afford an extra N10,000 premium incurred a liability of N1.7 million or N2 million plus and the old policy limit was N1 million. How is such a motorist able to raise the difference of either N700, 000 or N1 million plus?”
He wondered what will be the fate of the third party that has suffered the loss or damage if the negligent motorist cannot afford the extra payment to argument the cost of loss suffered?
Implications for the Insurance Industry
LEADERSHIP investigation had earlier revealed that the insurance industry is expected to see a rise in premium income from this form of insurance from N15 billion to N45 billion by the time their 2023 financial results come out, next year,
Speaking at the 43rd Annual General Meeting (AGM) of the company in Ikeja, Lagos, last week, the managing director of the firm, Mr. Razzaq Abiodun, assured that the 2023 financial year would be better than the outgone year as the impact of the new motor insurance policy rate takes effect, thereby, positively increasing premium income from this insurance policy category.
Although, Abiodun said, there are instances where motorists who were earlier insuring their vehicles comprehensively have resorted to third party, he said, the overall assessment of the impact of the premium hike on the bottomline of insurance companies is positive.
Similarly, at the 2022 Annual General Meeting(AGM) of Cornerstone Insurance Plc in Lagos recently, the group managing director/CEO of the underwriting firm, Mr. Ganiyu Musa assured shareholders that the insurer would record increased premium income arising from its motor insurance business in its 2023 financial year, saying, the figure coming in so far, suggests an increase in its premium income in the current year as a result of the rate hike.
At the unveiling of the AXA Mansard Insurance promo in Lagos recently, the chief executive officer (CEO) of the insurance firm, Mr. Kunle Ahmed said, while the new rate will take in more premium for the industry, it also comes with Third Party Property Damage(TPPD) from N1million to N3 million, which should be the attraction for motorist to subscribe to motor insurance.
While urging the about 9 million vehicle owners without valid insurance paper to approach underwriters for cover, he said, doing so will give them confidence and courage that whatever happens in future, insurers will intervene.
Similarly, the chairman of the Nigerian Insurers Association (NIA), Mr. Olusegun Omosehin, while speaking at the 52nd Annual General Meeting(AGM) of the body recently in Victoria Island (VI), Lagos, noted that, increase in third party motor insurance rate earlier in the year, would begin to reflect on the balance sheet of the underwriting firms in their 2023 financial year end.
Conclusion
While the rate hike is a good development for motorists and the insurers, experts said, it comes with the burden of more claims payment for the insurance industry, urging operators to be alive to their responsibilities when the insured motorists had mishaps and need to be compensated.
This, they believe, is the only publicity that underwriters can do to increase insurance patronage and gain the hearts of about 70 per cent vehicle owners who either don’t have any motor insurance or were parading fake insurance papers.
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