A lack of in-depth knowledge and scope of insurance is one of the major problems the industry faces in Nigeria. The average man does not know about insurance, let alone its nitty-gritty and overall importance.
However, to ensure they still benefit from insurance, the government put in place certain policies. These policies are compulsory for every business in the country and attract penalties if not observed. We call it compulsory insurance in Nigeria, and we extensively discussed it in this article.
Why is compulsory insurance in Nigeria important?
Compulsory insurance in Nigeria is important because it secures the benefits of insurance to average citizens that wouldnât normally benefit. Compulsory insurance focuses on protecting third-party workers by providing compensation in event of injury, property damage, or death during work.
In a way, it bridges the gap between the ignorance of the masses and the potential benefits of insurance. In a lump sum, whether they know their right or not, insurance covers them.
What are the types of compulsory insurance in Nigeria?
The available types of compulsory insurance in Nigeria are as follows:
Motor third party insurance:
This insurance is compulsory for vehicle owners and drivers. It includes motorcycles and other types of commercial and private vehicles. The motor third party insurance is mandated by section (53) of the motor vehicle (third party insurance) Act of 1945.
It requires that the motor owner covers against liabilities including bodily injury, property damage, death, and third party incidences. Also, this should cover the third party against incidences when using the insured vehicle.
Penalty for default
A fine of N100,000 or six months imprisonment. You could get both on the first conviction.
Employerâs liability/ workmenâs compensation insurance:
This act requires that every employer make a minimum monthly contribution of 1% of the total monthly payment of employees to the employee compensation fund. This fund is domiciled with the Nigerian Social Insurance Trust Fund (NSITF). It is protected under the employee compensation Act2010. This fund would be used to compensate the employee or beneficiaries in case of injury, disease, disability, or death arising from work.
Penalty for default
A fine of N20,000 or one-year imprisonment. The penalty could be both for a first case and changes to N100,000 and one-year imprisonment for or both for subsequent cases.
Group life assurance:
Group life assurance is powered by section 9 (3) of the pension reform act 2004. It mandates every employer with more than 5 staff to purchase a life insurance policy for all staff. The value of this insurance must be at least three times the annual total salary of each employee. It covers both private and public enterprises and requires staff to get paid in the event of death, mental or physical disability while insured.
Penalty for default
A fine of N250,000 or one-year imprisonment. Depending on the situation, it could be both.
Health care professional indemnity insurance:
The law mandates all medical institutions to purchase this insurance. These institutions must have a professional insurance policy to compensate patients or beneficiaries in case of incidences arising from professional negligence. It is established by section 45 of the National Health Insurance Scheme (NHIS) Act and applies to licensed health care providers.
Penalty for default
Revocation of medical license
Occupiers liability insurance or insurance of public buildings:
this insurance makes it compulsory for all public buildings to be insured in case of loss. This includes damages to property, bodily injury, or death that may be caused by earthquake, collapse, storm, fire, or flood. The law tags buildings accessible to the public for medical, commercial, educational, or recreational purposes as public buildings.
Penalty for default:
A fine of N100,000 or one-year imprisonment. You can get both in some cases.
Builders liability insurance or insurance of buildings under construction:
this is similar to occupiers liability insurance. However, they differ because it applies to contractors and owners of the building. The builder’s liability insurance applies to buildings higher than two storeys and mandated by the insurance Act 2003. It covers liabilities against construction risks and professional negligence that may result in bodily injuries, property damage, or death to workers and the public.
Penalty for default
A sum of N250,000 or three years imprisonment or, in some cases, both.
Aviation third party insurance:
It applies to aircraft operators and mandates them to purchase this insurance before operating. Aviation third party insurance covers three parties; the insurance company, aircraft operators, and third-party individuals. It provides compensation in case of property damages or death caused by the aircraft.
Marine insurance:
This insurance is compulsory for individuals and organizations who make use of marine transportation very frequently. They put it in place to cover losses that may result from marine operation and transportation.
Conclusion
Compulsory insurance in Nigeria is very important because it mandates safety structures for all parties. It ensures that both employees, employers, and the public are protected from unforeseeable risks and potential lawsuits. Here are problems that are facing Insurance in Nigeria due to COVID 19