INSURANCE: Concerns over Non Payment of N5.4bn Premium for Group Life Insurance

After seven months of consistent but futile efforts to persuade the federal government to pay the N5.4 billion premium for insurance of its employees, insurance sector operators now groan under heavy load of claims but trickle inflow of premium despite the ‘no premium no cover’ regime.

The insurers said the non- release of the N5.4 billion premium by

the federal government for group life insurance of its workers has constituted a major setback to the industry, even as they accused the federal government of lack of exemplary leadership.

They lamented that while the industry is yearning for government’s assistance in enforcing the six compulsory insurance policies nationwide through the insurance of its assets, the same government has refused to pay for life insurance of its workers.

Section 4 (5), of the Pension Reform Act, 2014 states that “Every employer shall maintain a group life insurance policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover.
But in the case of federal government workers, the group life insurance contract for the year 2016, expired since July last year, but government, has not paid the premium for the contract renewal.

Against this backdrop, there have been agitations by the general public just as the media has been probing the reason for the delay.
In particular, the federal government’s workers whom the group life insurance policy was meant to protect are much more concerned.

Both insurance underwriters and brokers who spoke to THISDAY on the issue, said the industry is no longer at ease with the delay, noting that by withholding the money, both the insurance underwriters and brokers are starved of their premium and commissions respectively.

According to the Managing Director African Alliance Insurance plc, Mr. Alphonse Okpor, by withholding the above fund, government is unnecessarily punishing insurance industry operators and risking the fortunes of its workers.
He said there is no justified reason for government to withhold the premium up to this present time considering the ‘no premium no cover’ regime in the country.
He said in his own view, government is not willing to pay the money, therefore operators should move ahead in their business for the year.
Also the Managing Director Boof Africa Insurance Brokers Ltd, Olumide Fatogun said the continued withholding of the group life insurance premium is a set back to the insurers .
He said the situation in the industry now is such that the ‘no premium no cover’ regime is stringent. Insurers have to make due returns to NAICOM in the face of obvious less premium received by operators.

He said in the mist of these, more claims are coming the way of the operators adding that the situation will adversely affect their performance when the result of their business for last year comes out.
“It is next year we will see their books, government who controls 79 percent of the economy is not paying so where are they going to get money, we are a little above water in our operations.

Suggesting the way forward, he said currently, government is in austerity measure and if government should push out money into capital project, it will better the lot of the insurance sector and the economy in general.
He also urged government to bring out money and ensure expansion of businesses, give credit rather than subsidy to operators.

Meanwhile, while government delays the payment of premium for group life insurance of its workers, insurance operators have insisted that should anything happen to any of the federal government’s employees whom the group life insurance contract is meant to protect, they are not obliged to pay any compensation given the prevailing ‘no premium no cover’ regime.

Sources close to the Office of Head of Civil Service of the Federation, revealed that bureaucratic processes, contest for supremacy between the National Insurance Commission (NAICOM) and the Office of the Head of Service, and the non-release of the projected N5.4 billion funds for premiums by the Finance Ministry were responsible for the delays in renewal of the policy.

The source explained that the renewal had to go through processes, first the certification of the underwriters by the Bureau of Public Procurement (BPP), secondly approval by President Muhammadu Buhari and lastly, request for release of funds by the federal ministry of finance.

Late last year, available information on this said the BPP, had certified 20 out of 21 insurance companies forwarded to it for the underwriting of the Group life insurance renewal of the civil servants, adding that though they had also written to NAICOM for confirmation NAICOM, as at then, had not responded.
However, he maintained that the Head of Service has no option than to go ahead with the list already certified by the BPP which also were among the companies that NAICOM had already published in a newspaper advert as having been licensed by the commission.

Further, he indicated that though the Head of Service has commenced processes for the renewal of insurance of the federal government assets, it has decided to conclude that of the Group life insurance in order not to over burden the government with so many requests for funds.
According to the source, there is no other problem regarding the policy renewal but government is just going through some processes.

He recalled that by this time last year, government published an advert inviting insurance practitioners to apply and that took six weeks. After six weeks submission, it took government some time to process all their papers and after it had shortlisted those it wanted, it needed certificate of no objection from the Bureau of Public Procurement.

“After the response was received, we had to write to Mr. President for approval. So, since the day we got that approval from Mr. President, we’ve continued with the processes of making sure that the perfect thing is done before we present to the Ministry of finance for payment. There is money for it, it is in the appropriation and nobody had told us that there is no money to pay for it.

“It is usually N5.4 billion annually for civil servants. That’s the figure and that had been recurring for the last three or four years. For this current one, I think we shortlisted 21 insurance companies and BPP gave us certificate of no objection for 20. And we can only work with those approved by the BPP and that approval has been confirmed by Mr. President, said the source.”

On the relationship between the Office of the Head of Service and the NAICOM, he maintained that the role of NAICOM begins and ends in advisory capacity as the apex regulator of the insurance sector and adviser to the government agencies on insurance matters.

He explained that though NAICOM could advise it, it is not bound to accept such advice as long as the processes of engaging under writers were in tandem with the law.

“NAICOM is regulating the industry. That is the insurance companies, the underwriters and brokers. They are the one registering them, they are the one giving them their licenses and they only act as adviser to the government agencies like the Head of Service. Their role ends with advisory. As long as we make sure that those we are using are those licensed by NAICOM, we think we have done due diligence. And they cannot and will not say that we have not consulted them”.

Speaking further, he said when somebody is acting as an adviser, there is a limit to the advice. If you’re my adviser, you can give me some advice and I can take or leave the advice. It is my responsibility to make sure that I act in tandem with the law. The office of the Head of Service is aware of the law and we are applying that to the letter.

He said government, has engaged the highest authority of NAICOM and they cannot deny that. But our day to day running of that program, I don’t think that anybody or any law said that we should leave that to NAICOM to do for us. If that is their expectation, I’m sorry I don’t share that view.”

 

By Ebere Nwoji