Third Party Motor Insurance and You

Many members of the insuring public and third party road users have not fully realiseed the importance of Motor (Third Party) Insurance in Nigeria. Motor (third party) Insurance covers the insured’s (policy holder) legal liabilities for death and bodily injuries to third parties and third party property damage. While remedies for bodily injuries and death are unlimited since we cannot put value on life (never mind that some people attach no value to life in Nigeria) the limit for third party property damage is N1million.

This limit can be increased with payment of additional premium. So third party motor insurance is very important as far as third party road users are concerned. Now the issue starts from how we source this policy. Many vehicle owners get theirs from motor park touts and touts in government offices. Who licensed them to issue policies? Do they have the consent of these insurance companies whose policies they are issuing? The purchasers are not interested; they only want a paper to show the police, so that they can “let my people go.”

With this mind-set, the whole essence of motor (third party) insurance, which is to have in place the minimum insurance to take care of the vehicle owner’s legal liabilities to third parties, while using his vehicle on the road, is defeated. Specifically, section 143 of the Road Traffic Act, states that: “a person must not use a motor vehicle on a road unless there is in force, in relation to the use of the vehicle by that person, such a policy of insurance or security in respect of third party risks…”

Many vehicle owners do not have the resources to take care of their legal liabilities for third party bodily injuries, death or property damage whilst using their vehicles on the road. These third parties include pedestrians, other vehicles, occupiers of these vehicles and properties owned by third parties. This makes motor (third party) insurance even more imperative.

In the event of an accident likely going to lead to a claim, the policy holder, through his broker or in person, if he has no broker, must notify the underwriter as soon as possible.

His responsibility is to describe what happened. It is not his responsibility to accept liability for the loss; that is for the underwriter to determine, based on the account of the accident by policy holder. Please note that a third party motor policy provides relief for third parties only; it does not cover own damage or provide personal relief for the policyholder there is a variant of Motor (Third Party) insurance in the market where. For a premium of N10,000, the policy can be extended to cover own damage to the limit of N250,000). But it is a wonderful policy, because for just N5,000 premium, you transfer the unlimited liabilities for third party bodily injuries and death and limited third party property damage liabilities to your underwriter.

In spite of the immense benefits, it is estimated that only two out of eight vehicles on our roads, have genuine motor insurance. Going by the estimated 16 million vehicles on our roads, we are probably talking of at least 12 million vehicles with fake insurance policies. This can only happen in Nigeria. Not even in neighbouring Ghana, where there is a compliance rate of over 60 per cent, will this happen. This is scandalous and the implications are grave. It means many Nigerian third party road users would have no access to any compensation in the event of bodily injuries, death or damage to their properties. Ignorance aside, any wonder that many road accidents are resolved with quarrels and fisticuffs.

Then even if we assume that the estimated 12 million vehicles all have fake motor (third party) insurance policies, the revenue loss comes to about N60b annually (N5,000 X 12 million vehicles. I am not even taking the price differential of third party motor premium for private and commercial vehicles into consideration). This figure is 139.83 per cent higher than the N42.91 motor insurance premium receipts of all Nigerian underwriters in 2014. With this kind of money thousands of more Nigerians would have been employed in the insurance industry.

Revenue losses to government are also enormous: billions of Naira in value added tax, remittances to the National Insurance Commission, company income taxes and pay as you earn (PAYE). This is what a few crooks, who do not pay taxes on their transactions, have denied the rest of us.

There is a simple remedy to the avalanche of fake motor insurance policies.

The umbrella body of underwriters in Nigeria, the Nigerian Insurers Association (NIA), has a platform, the Nigerian Insurance Industry Database. It has a database of all genuine motor insurances issued by Nigerian insurance companies and so far has records of over four million genuine motor policies in the database.

You can check the status of a motor policy either with the policy number or registration number of the vehicle. But I guess this all-important database has either not been given enough publicity or it is not worth the while of many policy holders to check the status of a policy that costs only N5,000 (chicken change) which will keep some “irritants” (law enforcement agents) off their backs.

For many vehicle owners, one of the measures to enforce compulsory motor (third party) insurance, which is checking of vehicle particulars by law enforcement agents, has become the reason for obtaining motor (third party) insurance. And many law enforcement agents have taken advantage of this mindset. These law enforcement agents have not helped the industry, in particular, and Nigerians in general. They go to the road to check vehicle particulars not for love of mankind, Nigeria or the insurance industry, but because of what they can get from defaulters or gullible and ignorant vehicle users. Mention must, however, be made of the few law enforcement agents who call insurance companies to confirm the authenticity of the motor policies purportedly issued by them or access the NIID right there on the road to confirm the authenticity of a policy. Only if the good law enforcement agents were in the majority…
Ewherido is the Managing Director/Chief Executive, Titan Insurance Brokers Limited.