As the N15,000 new third party motor insurance policy takes full effect in the current year, 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, LEADERSHIP learnt.
This is even as the industry plans to kickstart an awareness campaign on motor insurance by Monday 24th of July, 2023.
In Nigeria, there are about 12 million registered vehicles on Nigerian roads. However, of this huge number, only about three million vehicles translate to 25 per cent, have adequate insurance coverage, leaving about nine million vehicles uninsured.
Prior to now when the policy was being sold at N5,000, the industry was making about N15 billion from the three million insured vehicles with the assumption that these vehicles carry at least a third party policy.
However, the National Insurance Commission (NAICOM) had earlier 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.
The new rate is expected to increase the 2023 financial year bottomline of insurers writing motor policy, to N45 billion, which is a growth of N30 billion, translating to 200 per cent growth in premium income. However, this amount could even be more considering the fact that some vehicles were insured comprehensively, which attracted more premium.
While there are plans by the industry’s stakeholders to increase adoption of motor insurance in the country beyond the current three million vehicles, this is expected to increase further premium income from motor business beyond the estimated N45 billion.
Section 38 of the National Insurance Act 2003, currently in use, states that 3rd Party Motor Insurance is required as part of the minimum amount of auto cover one must carry as a road user. Penalties for non-compliance can include a fine of up to N250,000 and/or one-year imprisonment.
Meanwhile, at a press conference to kickstart campaign on new premium rates for motor insurances tagged ‘Small Premium, Big Cover’ in Victoria Island, Lagos on Tuesday, the chairman of Publicity Sub-Committee of the Insurers Committee, Mr. Akinjide Orimolade, noted that the Insurers Committee through its Publicity subcommittee decided to embark on this short but eventful campaign to shed more light on the new rates and generally improve insurance uptake among the citizens.
According to him, “this is a pan Nigerian campaign covering social media, print, radio jingles and television commercials some of which you will be seeing now. It is a three months period of campaign that is expected to positively increase the subscription of motor insurance policy in the country.”
Quoting the earlier circular from NAICOM on the motor rate increase, he said, while comprehensive motor insurance policy premium rate shall not be less than 5% of the sum insured after all rebates/ discounts, insurance companies have since commenced implementation of the new rates and consumer education continues to dominate discussions at various fora.
Speaking earlier on the impact of the new third party motor rate, 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 the increase in the Third Party Property Damage (TPPD) of N3 million is to the benefits of the motoring public, he added that the market report on acceptability of the new motor rate is positive, although, it could be better with increased awareness on its benefits.
Similarly, he said, there will be a series of engagements with relevant stakeholders in a move to increase adoption of this coverage, assuring that the insurers are equal to the task of paying genuine claims arising from insured risks.
Speaking at the unveiling of the AXA Mansard Insurance promo in Lagos last week, the chief executive officer (CEO) of the insurance firm, Mr. Kunle Ahmed said, the gap between insured and uninsured vehicles is huge, adding that, though the time is tough, he advised motorist that this is even the right time to insure their vehicles because it will be tough to replace a lost asset during this tough economy, without insurance.
As a proactive underwriting firm, he said, the company understands the tough economic situation most Nigerians are passing through, which is leading to less disposable income, noting that this was the reason why the company is giving free additional fire insurance cover for every motor policy purchased through any of its platforms.
Stating that, 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 papers 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) 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.
Omosehin added that, despite the economic downturn being experienced in Nigeria with its cataclysmic effect on all aspects of our national life, the Nigerian insurance industry continues to take pride in its place in the Nigerian economic space as the economic driver, restorer of businesses, and dependable safeguard for national assets.
The chairman said, notwithstanding the challenging business operating environment, insurance companies, during the 2022 financial year, were able to grow member companies to about N726.2 billion, an increase of about 33.9 per cent over the premium income of N569.1 billion recorded in 2021. Agusto & Co. Affirms Fidelity Bank’s ‘A’ rating, With Stable Outlook
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