RE: What insurers won’t tell you

I would not have bothered to do this rejoinder to the article with the above title by Mr. Azuka Onwuka in the Punch Newspaper of May 12, 2020, because he did a tremendous job for the insurance industry as a non-insurance professional. His article was very informative and largely accurate, but there are some inaccuracies, hence this rejoinder.

For those who missed Onwuka’s article, which trended last week, this is the summary. The Motor (Third Party) Insurance, which many Nigerians take for granted and only acquire to have something to show the police on the road, does have some benefits. As the name implies, Motor (Third Party) Insurance is a benefit policy for third parties only. The benefits are unlimited payment to third parties for bodily injuries or death caused by the insured motorist. In theory, liabilities arising out of death and bodily injuries are unlimited because you cannot put a value on life or limb, but in practice, there are parameters for calculating benefits; for instance, the deceased’s annual income while he was alive. The Insurance Act of 2003 extended the third party cover to damage of third party property to the tune of One Million Naira. A policyholder can increase the limit of his property damage with payment of additional premium.

The Motor (Third Party) Insurance Act of 1945, which took effect from 1st April 1950, made these provisions for third party death and bodily injuries. The act also made it an offence for anybody to use a motor vehicle on the road without having in place the minimum Motor (Third Party) Insurance.

But it is not correct, as Onwuka wrote, that “if you and someone hit each other and damage each other’s vehicles and both of you have that N5,000  (third party) insurance cover, the person’s insurer should pay for the damage to your vehicle, while your insurer should pay for the damage done to the person’s vehicle.” Two people are hardly at fault in an accident. Only one party is at fault. In insurance, liability must be established before there can be a claim. For instance, if the accident happened at a roundabout, the vehicle driver on the right is likely to be at fault, because he is supposed to give way to traffic on the left. In such a case, he is liable and his insurers will fix the vehicle of the other party to the limit of N1 million. If the cost of fixing the vehicle is beyond N1 million, say N1.4 million, the guilty vehicle owner will pay the balance of N400,000 from his pocket. In addition, he will be responsible for fixing his own vehicle. He gets no remedy for fixing his own vehicle.

The second wrong impression I want to correct is where he wrote: “Naturally, the insurers do not bother to explain to those who patronise them what their rights are.” Professionals in the insurance industry do explain the details of policy covers to policyholders. Talking specifically of motor insurance, my company, for instance, usually sends a note on the extent of cover and dos and don’ts of motor insurance to every new policyholder. We emphasize the need to adhere to the policy provisions because it makes life easier for all parties (policyholder, insurance broker and insurer) if there is a claim. Beyond this, I have over 10 published articles educating the insuring public on Motor Insurance in general and Motor (Third Party) Insurance, in particular. For the avoidance of doubt, check the following links: https://guardian.ng/business-services/third-party-motor-insurance-and-you/ , https://www.businessamlive.com/motor-insurance-beware-of-fakes/, https://www.businessamlive.com/category/columnist/page/20/, https://www.businessamlive.com/motor-third-party-insurance-conundrum/, https://www.businessamlive.com/motor-claims-procedure-simplified/. Other insurance professionals and insurance companies have done similar works to educate the public on Motor (Third Party) Insurance.

The third wrong assertion by Onwuka is that the fact “that many Nigerian car owners or drivers don’t know their right is to the advantage of the insurance companies.” It is also not an advantage for the insurance industry that policyholders do not know their rights. In fact, it is a major drawback. The insurance industry wants policyholders to know their rights; we want the message of insurance to get to the ends of the earth so that many more people will embrace insurance offerings, including Motor (Third Party) Insurance. The major problem the insurance industry has with Motor (Third Party) Insurance is ignorance. As Onwuka rightly observed, motorists do not know the benefits. Consequently, they get fake motor certificates from under Lagos flyovers, Oluwole Market, motor licensing offices and all the wrong places for the same N5,000 for genuine certificates.

As at 2019, there were about 12 million vehicles on Nigerian roads, but only about 2.53 million vehicles had genuine insurance and were on the Nigerian Insurance Industry Database (NIID). What happened to the balance of 9.5 million vehicles? They were either carrying fake insurance certificates or they had no insurance certificate at all. A report about two years ago said eight million vehicles on our roads had fake motor insurance certificates. That was about 67 per cent of the vehicles on our roads. In monetary terms, even if you use the N5,000 premium for private vehicles premium (third party insurance premium for commercial vehicles is N7,500 minimum)  to multiply eight million vehicles, it comes to N40 billion in lost premium. Does anyone think the insurance industry is happy losing this humongous sum? No way! Faking of motor insurance certificates is a multi-billion naira business in Nigeria and there are entrenched interests.

Let me conclude by enlightening the public about how the insurance industry operates: There are various professionals and institutions performing different roles, but only two are relevant to our discussion today. You have the insurance companies (also called insurers and underwriting companies), which are the risk bearers, and the registered insurance brokers, who are intermediaries between the insuring public and the insurance companies. Now, every policyholder has the right and option to go directly to the insurance companies or go through a registered insurance broker (RIB) to transact business.

But insurance is steeped in law and too technical for the average man to understand; consequently, I advise policyholders to do their insurances through registered insurance brokers and it is at no extra cost because the services of insurance brokers to policyholders in the normal course of business are free. A registered insurance broker provides a wide range of professional advisory services to the insuring public. They help potential policyholders to reduce cost by shopping around insurers and getting competitive rates before placing the business. They also help policyholders to reorganize their insurance portfolio and in the process reduce cost and at the same time get the appropriate cover. Insurance brokers also advise clients on risk improvement and reduction in risk exposure and in the process get lower rates for clients. An insurance broker also helps policyholders to process their claims, among many other services.

In my opinion, using an insurance broker, which cost the policyholder nothing, will reduce substantially many of the complaints and dissatisfaction against the insurance industry because the job of insurance brokers is specifically to protect the interest of policyholders and keep them out of trouble.

An insurance broker can be likened to a lawyer. Even though plaintiffs and defendants can represent themselves in court, how dare you? You hire a lawyer to enhance your chances. So, get a registered insurance broker to handle your insurance matters. Unlike lawyers, however, insurance brokers do not charge clients any fee. They get their commission from insurance companies.