Nigeria Intensifies Enforcement of Vehicle Insurance, Prompting Renewals and Addressing Public Concerns
The Nigerian Police have intensified enforcement of third-party vehicle insurance, with hefty fines of up to N250,000 for those caught without it. This initiative appears most effective in Lagos, Akwa Ibom, and Edo states. Moreover, the Federal Road Safety Corps (FRSC) and the Nigeria Police in Anambra, Ebonyi, and Enugu states have urged motorists to comply with third-party vehicle insurance to avoid legal repercussions.
This enforcement follows a rise in third-party premium insurance rates in December 2022, when the National Insurance Commission (NAICOM) increased the cost from N5,000 to N15,000. In response, many vehicle owners are now renewing expired policies to avoid penalties, even amidst economic challenges.
To delve deeper into the implications of these changes, Nairametrics spoke with Insurance Expert, Kemi Adeyeye, about the recent changes, and the value of insurance.
Nairametrics: What should Nigerians know about insurance?
Kemi Adeyeye: Insurance is a financial protection mechanism that helps manage risk and uncertainty. It provides protection against unexpected events such as accidents, theft, natural disasters, or even death. There are many types of insurance available, including auto insurance, which includes motor insurance. Motor insurance can be divided into two parts: third-party insurance and comprehensive insurance. Third-party insurance allows people to move around freely, making it an important type of insurance to have.
However, if you want maximum protection for your car, a comprehensive package is advisable. With this, you are well-covered in case of accidents, accidental injuries on the road, or damage to your car. Additionally, if you cause damage to a third party, the insurance company will cover the expenses under a comprehensive plan. This includes damages to the vehicle, theft or loss, and even bodily injury to a third party.
Third-party insurance also offers coverage, but its coverage is specifically for the third party if your car causes any damage to their vehicle.
Nairametrics: We know that most people choose third-party car insurance over the comprehensive coverage. Could you tell us more about third party car insurance?
Kemi Adeyeye: Third-party insurance is compulsory for every vehicle owner in Nigeria, and it is meant to be renewed annually. The benefits of third-party insurance are for the other party involved. I can confirm that in my company, a policyholder is entitled to a minimum of one million naira yearly.
It’s vital to note that with a third-party policy, your insurance company is responsible for repairing the other person’s car if you are at fault, not your own. In the event of an accident, it’s important to take pictures of both your car and the other person’s car.
Nairametrics: Are people really claiming on this third-party insurance?
Kemi Adeyeye: Yes, it is really working. Although, people tend to think that they can be inconvenienced or stressed by the process, so they often believe that the insurance company won’t pay their claims. This is a wrong mindset, and my company will pay for third-party claims in case of damages or unforeseen occurrences. If you have purchased your third-party insurance from the right place, you can make a claim anytime if there’s any need. Regardless of whether you know the agent who renewed your car insurance or not, it’s your right to walk into the office and file a claim.
Nairametrics: With the government beginning enforcement, is there a surge in third-party insurance registrations?
Kemi Adeyeye: There isn’t really a surge, but many people are renewing their policies, as they fear falling victim to the enforcement. Many still struggle to pay the N15,000 premium.
Nairametrics: Is there any difference between the third-party insurance of today compared to the one that has always been?
Kemi Adeyeye: There is no difference; it’s still the same third-party insurance. The only change is the increase in the price, which is 200% from the original N5,000 to N15,000.
Nairametrics: The government is now clamping down on defaulters with a likely fine of about N250,000; is that fair?
Kemi Adeyeye: Most Nigerians only do the right thing when under pressure. Without this enforcement, many people would simply overlook the need to have insurance. There are hundreds of thousands of uninsured vehicles on Nigerian roads daily, which is not good for anyone, including other road users. The government must do what it has to do.
Nairametrics: Why do you think some vehicle owners refuse to renew their vehicle insurance?
Kemi Adeyeye: There are two major reasons in my opinion which could be influencing this decision. The first reason may be as a result of the significant increase from N5,000 to N15,000. The economic situation is not favorable, so the increase is definitely placing a further strain on people. The second reason is that most Nigerians are complacent and don’t see the need for insurance, viewing it as a waste of money. However, we are making efforts to educate the public, and things are improving gradually.
Nairametrics: How long does it take to process a third-party insurance claim?
Kemi Adeyeye: It takes about one to two weeks to have you claim done. With my company, when you submit your claim, once we can confirm all the details and ensure that the incident happened, we swiftly respond to the claim.
Nairametrics: How many times in a year can you request a claim? You said third-party insurance covers up to N1 million per year, right?
Kemi Adeyeye: On third-party, yes. So if that particular damaged car costs N400,000 to fix, then the policy holder still has N600,000 for that year before the end of the policy.
Nairametrics: As an insurance expert, what is the major challenge you face in your day-to-day work?
Kemi Adeyeye: We have many people in Nigeria who still don’t believe that insurance is beneficial, which is also one of the reasons why the government is enforcing it. We constantly tell them that insurance is working.
I met someone at a VIO office, and I wanted to market our product when he said that he doesn’t do third-party insurance, rather he does comprehensive. Another challenge is that people still tell you that insurance is not working in Nigeria, and that they can only do third-party.
Nairametrics: So we have talked a lot about third-party insurance. I want you to explain the difference between that and comprehensive car insurance.
Kemi Adeyeye: Comprehensive insurance is advantageous to have for your car, as it provides great peace of mind. Unlike third-party insurance, which doesn’t cover your car, a comprehensive package covers what is called ‘tax’.
If damage occurs to your car that is worth N5 million, you will only pay about 5% of the value of the car. If the car is stolen, the insurance company will provide coverage for the damage, replacing the car with cash or assisting you to get a new one. Comprehensive insurance covers both your car and the third party’s vehicle, if the damage caused involves another party.
Nairametrics: Is there an extent of damage a car should get to before somebody can say, I want my insurance company to fix this? Either third party or comprehensive.
Kemi Adeyeye: You’ve paid for your service, so anytime, any day, you are welcome to make a claim. Even with a scratch worth N10,000, you are eligible to file your claim. Simply take a picture of the damaged part, send it to me or the insurance company that has insured your car, and the bill will be sorted out.
Nairametrics: We have been talking about car insurance, aside from that, what other insurance are there in Nigeria?
Kemi Adeyeye: We have property insurance, which some people do, and also fire and burglary coverage. We also offer health insurance, which is mandatory for those traveling outside the country. Further, there is savings plan to help one plan for the future, as a pension for themselves or their children’s future.
