With the hike in third-party motor insurance premium, effective January 1, 2023, there are concerns that incidences of fake policies may be rampant as well as affordability issues.
According to analysts, the new premium rate could become appetising for fake operators, particularly at vehicle licensing centres, and offering something cheaper would attract undiscerning motorists.
They said the premium hike may prompt some Nigerians to take fake policies, which would be to their detriment and against the growth of the insurance industry.
The National Insurance Commission (NAICOM) on December 22, 2022, increased the premium rate for motor insurance in Nigeria.
In the new directive, private vehicles that were paying N5,000 premium for N1 million Third Party Property Damage (TPPD) limit are now to pay N15,000 premium for N3 million; owner good vehicles are to pay N20,00 premium for N5 million, and staff buses are to pay N20,000 premium for N3 million.
This is contained in a circular issued by NAICOM, signed by Leonard Akah, director, policy and regulation at the commission on behalf of the commissioner for insurance, and sent to all insurance institutions.
Pius Apere, chairman/CEO of Achor Actuarial Services Limited, described the increase in third-party motor insurance tariff to N15,000 from N5,000 as a welcome development, saying it was long overdue.
He, however, said the full potential may not be achieved as there are implications and challenges to be dealt with.
He said fake motor insurance policies will be on the increase.
“There will be an increase in the number of uninsured vehicles in the country because many motorists may not be able to afford to pay the new price, having considered the economic conditions in the country.”
Apere said the insuring public might consider the timing of the price increase to be inappropriate due to the economic hardship facing the citizens of the country.
He described enforcement as key, asking whether insurers are ready and willing to comply strictly without compromise.
Jide Bankole, a business development manager with one of the top insurance companies, said selling of policies on the new rate for third-party motor policy and comprehensive has started.
“I can confirm to you that we have made sales at the new rate, and there is no going back. For comprehensive policies, we are applying the approved 5 percent,” he said. “What we have done is to allow customers who are taking comprehensive policies to decide on how they want to pay their premium, half-yearly or full year, and I think they are comfortable with that.”
According to Bankole, the policy is good and what the industry requires is enforcement.
“I don’t think any operator will flout this policy because NAICOM is not joking about it,” he said.
Read also: Insurance consumers reject 200% increase in third-party motor premiums
Chika Onwunali, managing consultant of Premium Debate, noted that the Insurance Consumers Association of Nigeria had on December 29, 2022 called on NAICOM to reverse the increase in premium rate.
“I will rather advise them to sensitise their members and the public to make claims, particularly on third party motor policy,” he said.
According to him, there is a need for more sensitisation, from the regulator, operators and other interest groups, to let the public understand that they could actually make claims in the event of a third-party liability loss.
“We often see motorists fight and quarrel along the road at accident points; it should not be so because you can actually make claims,” Onwunali said.
According to NAICOM, commercial trucks and general cartage are to pay N100,000 premium for N5 million TPPD limit; tricycles, N5,000 for N2 million TPPD limit; and motorcycles, N3,000 for N1 million TPPD limit.
It said for comprehensive motor insurance policy, premium rate shall not be less than five percent of the sum insured after all rebates and discounts.
The commission said failure to comply with this circular shall attract appropriate regulatory sanctions.