Group Life Insurance Adoption Remains Low Despite Legal Requirement – Stakeholders

Stakeholders in the insurance industry have highlighted a significant opportunity for improvement regarding group life insurance adoption in Nigeria, despite its mandatory status under the Pension Reform Act (PRA) 2014.

This act mandates employers to provide group life insurance for their employees, yet many fail to meet this requirement, which can leave families vulnerable when unexpected events occur.

While employees of Federal Government Ministries, Departments, and Agencies (MDAs) benefit from group life insurance facilitated by the Office of the Head of Service of the Federation, counterparts in the private sector and at state and local government levels are often not afforded the same protection.

According to Section 4(5) of the PRA 2014, every employer is required to maintain a Group Life Insurance Policy for each employee, which should cover a minimum of three times the employee’s annual total emoluments. Moreover, Section 4(6) stipulates that if an employer fails to make timely payment, they are still responsible for arranging coverage for claims arising from employees’ deaths during that period. Furthermore, Section 8(1) ensures that upon an employee’s death, their benefits under the life insurance policy must be paid to the designated beneficiary.

Partner at Premium Debate, Chika Onwunali noted that workplace accidents and unexpected deaths can often leave families with limited support.

He emphasized that “having group life insurance can provide crucial financial safety and support for families during such challenging times. The stark contrast between regulatory requirements and actual compliance underscores the need for improved awareness and action.”

The founder of Mutual Aid Specialist Limited, Adetola Adegbayi shared her experience of implementing a comprehensive group life and personal accident insurance policy.

“This initiative extended beyond full-time employees to include outsourced staff, highlighting a commitment to workforce protection,” she stated.

She noted that having group life insurance can significantly transform the financial landscape for beneficiaries, ensuring that support is available during difficult periods.

Adegbayi stressed that insurance is not merely a financial product; it serves as a vital tool for maintaining dignity for families in times of grief, ensuring they are not left vulnerable.

She urged companies and state governments to seize the opportunity to adopt group life insurance policies, not only as a protective measure for employees but also as a strategic financial decision for their organizations.

Group life insurance is essential within Nigeria’s life insurance market, representing 26 per cent of total life premiums as of the third quarter of 2024. This segment is driven by regulatory mandates and an increasing demand for financial protection, especially highlighted during the COVID-19 pandemic.

At the state level, progress is being made, with eight states—Lagos, Kaduna, Edo, Osun, FCT, Ekiti, Ondo—fully implementing the Contributory Pension Scheme (CPS) and Jigawa’s Contributory December Benefits Scheme (CBDS), which includes the establishment of Group Life Insurance for employees.

Notably, Lagos State has recently distributed approximately N701 million to 232 families of deceased public servants as insurance death benefits, fulfilling obligations to support those who lost their lives while in active service.

The stakeholders noted that “increased compliance and greater adoption of group life insurance can provide essential protection for employees and their families, fostering a safer and more secure working environment across Nigeria.”