Joy Agwunobi
The Nigerian Police Force (NPF) is set to begin the enforcement of compulsory third-party motor insurance for motorists nationwide starting February 1.
While this initiative has garnered widespread approval from insurance experts and stakeholders, concerns about awareness and compliance persist, highlighting the need for intensified public education efforts.
According to NAICOM, the Third-Party Motor Insurance Policy is the minimum level of coverage compulsorily required by law, while Comprehensive Motor Insurance remains optional but recommended. The policy aims to safeguard road users by ensuring financial recovery for damages, injuries, or loss of life caused by accidents involving insured vehicles.
NAICOM explained that the policy is sold for an annual premium of ₦15,000 to private car owners, while premiums for commercial vehicles vary depending on the type of vehicle. It provides policyholders with a limit of up to ₦3 million for the repair or replacement of a third party’s damaged property.
In January 2023, NAICOM increased the premium for this insurance from ₦5,000 to ₦15,000 annually. Despite its affordability compared to comprehensive insurance, a significant portion of the population remains unaware of its benefits, leading to widespread non-compliance.
Funmi Adebowale, head of research at Parthian Partners, emphasised the importance of understanding the policy’s advantages. “Accidents are unforeseen circumstances that can disrupt financial plans,” she noted. “Having a third-party insurance policy in place ensures that such financial burdens are eased, protecting individuals from immediate financial distress.”
The policy, which provides coverage of up to ₦3 million for damages, serves as a vital financial safety net for motorists. However, Adebowale pointed out that a lack of awareness among Nigerians about these benefits hinders compliance with the policy. She stressed the need for the National Insurance Commission (NAICOM) to intensify its public sensitisation efforts.
“If people understand the significance of this policy and the benefits it offers, compliance rates will increase substantially,” Adebowale remarked. ”
According to her, one of the main issues is that people are unaware of the policy’s importance. Many just see it as an annual payment without understanding the value it provides. If people are made to see the tangible benefits, they will be more likely to comply. This lack of awareness is a major problem, and NAICOM has a critical role to play in organising general sensitisation campaigns.
Another issue Adebowale highlighted is the lack of trust in the insurance sector. “There’s a perception that after taking people’s money, insurance companies make the claims process unnecessarily difficult. However, there have been significant improvements in this area,” she noted. “NAICOM has been working hard to address these challenges, but more efforts are needed. Over time, things have gotten better, and with continued improvements, public trust will grow.”
The widespread issue of fake insurance policies presents another significant challenge, with unsuspecting motorists often falling prey to fraudulent agents who issue counterfeit certificates at reduced costs. This malpractice not only erodes trust in the insurance system but also leaves policyholders without coverage when accidents occur. Adebowale emphasised the importance of continuous awareness campaigns to educate the public about licensed insurance providers as a means to combat this issue.
“Many people are unaware of the licensed insurance companies. A lot of individuals rely on agents for tasks like renewing their vehicle licenses or obtaining road users’ insurance. Because they are busy, they delegate these responsibilities to agents without verifying their authenticity. Some agents take advantage of this and issue fake insurance certificates. Since most people don’t know the list of valid insurance companies, they have no way to determine whether the certificate they received is genuine or not,” she explained.
Adebowale further noted that while some policyholders are genuinely unaware they hold fake certificates, others knowingly opt for the cheaper, counterfeit option due to financial constraints. “There are individuals who think, ‘I can’t afford ₦15,000 for a proper policy, but I can get a certificate for ₦5,000 that I can use,'” she said.
However, Adebowale cautioned against such practices, stressing the risks involved. “People need to understand that if you have a fake policy and there’s an accident, you get nothing. What’s the point of saving ₦5,000 when a legitimate policy for ₦15,000 could provide coverage of up to ₦3 million in case of an accident?” she explained, adding that raising awareness and helping people understand the benefits of genuine insurance coverage can encourage more individuals to make the right choice.
Beyond the advantages offered by the compulsory insurance policy, there are penalties for non-compliance. According to NAICOM, defaulters risk fines of up to ₦250,000, possible imprisonment, and the loss of their driver’s licenses. Unfortunately, many Nigerians remain unaware of these repercussions, which hampers adherence to the policy.
Adebowale stressed the need for consistent communication of both the benefits and consequences tied to the policy. She stated, “NAICOM must continuously emphasise that there are benefits to compliance and penalties for non-compliance. People should clearly understand the risks they face if they choose to ignore the law. If they are aware of the full picture, including the consequences of their actions, it will prompt them to make informed decisions.”
She explained further, “People need to hear this message repeatedly until they grasp it—if you choose to comply, you gain benefits. However, if you opt out and are caught, you should be ready to face the consequences. Educating the public about both sides of the issue is essential. Let them weigh the risks and decide if they can bear the penalties. If not, they should follow the proper procedures.”
To ensure the success of this policy, she stressed that NAICOM and insurance stakeholders should prioritise public education campaigns. Leveraging traditional and digital media platforms can help reach a wider audience and address misconceptions about the insurance sector. Additionally, improving the claims process and ensuring transparency will go a long way in rebuilding public trust.
