Fake motor insurance certificates

Anegligent third party vehicle rammed into my client’s vehicle about two weeks ago. My client called me from the accident scene. I told him to take photographs of the truck showing the registration number and also demand for the motor insurance certificate, which the negligent party surrendered. He snapped and sent to me. I used the registration number to check the status of the vehicle on the Nigerian Insurance Industry Database (NIID), but no information came up. I checked again later only to get a result that the insurance of the vehicle had expired. Meanwhile, the certificate showed 17th September 2020 as the expiry date. The certificate is apparently fake.

The NIID has about 2.53 million vehicles on its database. Meanwhile, there are about 12 million vehicles on our roads. What happened to the balance of 9.5 million vehicles? They are either carrying fake insurance certificates or they have no insurance certificate at all. Another report said eight million vehicles on our roads have fake motor insurance certificates. That represents about 67 per cent of the vehicles on our roads. In monetary terms, even if you use the N5,000 premium for private vehicles (insurance premium for commercial vehicles is N7,500 minimum) to multiply 8 million vehicles, it comes to N40 billion in lost premium. Faking of motor insurance certificates is a multibillion naira business. There are entrenched interests and whatever efforts we have made so far have barely scratched the surface of the problem.

Tackling the problem requires collaboration and the involvement of all, including insurance companies and insurance brokers. At least, N40 billion is involved; and that is about 10 per cent of the gross premium currently written by all underwriters in Nigeria. This is more than enough incentive for the insurance industry to be involved. The regulatory body of insurance professionals, the National Insurance Commission (NAICOM), should also be deeply involved. At least one per cent of the N40 billion will go to NAICOM in form of statutory fees from brokers and underwriters. But beyond pecuniary gains, it will be a major milestone for the NAICOM’s incumbent helmsman and his team.

On the part of government, the Federal Road Safety Commission, law enforcement agents and other concerned agencies should be involved. The government stands to benefit financially from increased premium from motor insurance. It will come in form of company tax and PAYE. Currently, those involved in the sale of fake motor certificates do not pay any tax to the government. It will also reduce unemployment because the insurance sector will employ more people.

But government has a more important reason to ensure the stamping out of fake motor insurance certificates. There are six compulsory insurances in Nigeria and Motor (Third Party) Insurance is one of them. The Motor Vehicles (Third Party) Insurance Act of 1945, which took effect from 1st April 1950, makes it an offence for anybody to use a motor vehicle on the road without having in place the minimum Motor (Third Party) Insurance to cover the motorist against legal liabilities arising from third party bodily injuries or death.  The Insurance Act of 2003 extended the cover to take care of liabilities arising from damage to third party property to the tune of One Million Naira. It is the responsibility of the federal government that enacted the laws to ensure that third parties who suffer injuries and property damage get compensation from the negligent motorist. Also, families who lose their loved ones to accidents on the road should get compensation from the guilty motorist.

Beyond enforcement, the various stakeholders need to step up creation of awareness. Motor (Third Party) Insurance is in the interest of the policy holder. The policy protects him from legal liabilities to third users for bodily injuries, death and property damage. The benefits for both bodily injuries and death are unlimited, though there are parameters for arriving at a reasonable figure, while property damage has a limit of N1 million. So, if a motorist with a genuine Motor (Third Party) Insurance is involved in an accident where third parties are involved, his insurance company will pick up the bills for the third party bodily injuries and property damage (to the limit of N1 million). I skipped death, because I pray death is not involved, but if it happens, the insurance company is liable. The only problem the policy holder has to worry about is own damage (damage to his vehicle). So why would people not be interested in an insurance where you pay so little and are entitled to so much. Ignorance is a major inhibiting factor.

Another group that needs to be seriously enlightened is other road users. They must be well informed so that they can know their rights. If motorists get hit by third party claims, they will sit up and do the appropriate thing.

Another area where we need to enlighten both motorists and other road users about is the Nigerian Insurance Industry Database (NIID). The database has the information on all the vehicles with genuine motor insurance in Nigeria. It is accessible to the public and you can check the insurance status of any vehicle with either the policy number or registration number. Where the guilty party is uncooperative and refuses to produce his insurance certificate, simply look at his number plate and use it to check the insurance status of his vehicle.

Fake motor insurance is a global problem. In the United Kingdom and United States of America, the problem is there, though on a smaller scale. Nearer home, the problem is also there, but the countries are doing something about it. About 40 per cent of the vehicles that ply Kenya and Ghana roads carry fake motor certificates. That is better than Nigeria where about 79 per cent of vehicles carry fake insurance certificates and only about 21 per cent of vehicles carry genuine motor insurance certificates. To check the menace in Ghana, the National Insurance Commission (NIC), the insurance regulatory body in Ghana, will roll out an electronic database in 2020. It is akin to our NIID. In their own case, the verification may be done through a mobile app, a text message or by scanning a code on the insurance sticker. The NIC said it is collaborating with the Driver and Vehicle Licensing Authority, DVLA, and the police Motor Traffic and Transport Department, MTTD as well as the drivers unions, to ensure that the system is run effectively. Reducing the number of vehicles with fake insurance requires collaboration.

The war against fake motor insurance is one that the insurance industry and government must wage with everything in their arsenal. Where persuasion and enforcement are not enough, punishment should be meted out.