Examining the benefits of Third Party Motor Insurance Policy
Commissioner for Insurance, National Insurance Commission (NAICOM), Alhaji Muhammed Kari
A whopping 96 per cent of vehicle owners in Nigeria are ignorant of the many benefits of the Third Party Insurance, a compulsory insurance policy for every motorist as directed by the federal government. A recent findings by Nigeria Auto journal revealed that owners still individually repair third party vehicle/ property damage caused by their vehicles even when they are holders of the Third Party Motor insurance policy. Here The revealer examines the many benefits of the policy and encouraged the policyholder to take advantage of them
A recent findings has revealed that about 96 per cent of Nigerian who carry the Third Party Motor Insurance Policy are ignorant of what they stand to benefit by this policy hence they lose this benefit year in year out even when the need to make claims arises.
According to the report, “Invariably, Insurance companies continue to enjoy almost 100 per cent of the entire premium made from Third Party Motor Insurance, thanks to the ignoramus that created the opportunity but to their own loss.”
Of the entire compulsory insurances, the report stated, Third Party Motor Insurance Policy remains the most enforced and at the same time remains the one less benefitted from by the holders of this policy and anomaly that need to be addressed.
There are three basic motor insurance covers which are Comprehensive Motor Policy, Third Party Fire and Theft Motor Policy and Third Party Only Motor Policy made compulsory by the Federal government through the insurance Act of 2003.
Out of the three, the last one (Third Party) is the minimum insurance required by law for every vehicle owner. Legally, you are not expected to drive any vehicle on any public road without insurance.
Third Party Motor Insurance Policy in Nigeria has its legal backings in Section 68 of the Insurance Act of 2003. The Act states that “No person shall use or cause or permit any other person to use a motor vehicle on any road unless a liability which he may thereby incur in respect of damage to the property of third parties is insured with an insurer.
The Third Party Policy provides, the report said, indemnity to third parties for death, bodily injury and property damage as a result of accident involving the insured automobile.
“However, often than not motorist and drivers do not take the policy serious let alone going for the benefits when involved in accident or incidents, rather they secure the policy for the purpose of what goe with the slogan “Police-Let-Me-Pass” in local parlance. It is mandatory and cheap hence people mostly go for it in order not to be disturbed or stopped by the law enforcement agents that operate on the roas like the Police Force, Federal Road Safety Corps, Lagos State Transport Management Agency (LASTMA) among others.
“Most vehicle owners spoken to during this finding who have had their vehicle insured on third party damage to another car or property showed ignorance of the benefits. They were of the view that Third Party basically enriches the insurers because it is mandatory with little or no claims in a whole year. Most of them said they hardly had cause to seek claims and when they had, either they forgot and went ahead to handle the repairs personally or were skeptical of the delay or other complications from the insurance companies. Hence, the number of people benefiting from this policy remains minimal.”
The report quoted one Engineer Enyi Daniel as saying “I hardly remember I have that policy let alone remembering the benefits. I just renew it yearly along with other vehicle particulars to avoid embarrassment from the law enforcement agents on the roads. The few times my car hit somebody’s car along Agege Motor Road, I had to fix his vehicle myself my mind didn’t even go to the Third Party Motor Insurance I carry and I tell you it’s like that with most Nigerians.”
Mrs. Eniola Ajiboye said when her car lost break and hit somebody’s wall in her neighbourhood, she thought it was going to be straight forward getting the claims from her insurance company (name withheld) but it started dragging hence I had to personally repair the wall.
“We’re helping the insurance companies to get richer by the Third Party Motor Insurance Policy though we were told of the benefits but people hardly go for it and the following year you renew. When I had the need for the benefits, it was not forthcoming for reasons I consider trivial and I have not heard from any of my friends or relations benefitting from it. The government can scrap it, let’s focus on the Comprehensive Insurance,” Mrs. Ajiboye said in the report.
Mr. Mode Osas said in the report that he was once got N300,000 from his insurance company to repair a compound wall damaged by his Sport Utility Vehicle (SUV).
On why Third Party Motor Insurance is not regarded despite its benefits, according to the report, Auto Analyst and Senior Lecturer, Covenant University, Ota, Ogun State, Dr. Oscar Odiboh, looked at the policy from three perspectives saying that third party insurance particularly in the automotive industry is not a good scenario.
From the government perspective, he said, the government has the responsibility of regulating and ensuring that the particulars of vehicles are in order and up to date through the security agents ensuring that your particulars are complete.
From the insurance angle, he pointed out that there are two types of auto insurance: Comprehensive which is highly expensive but more reliable in terms of prompt settlement but that unfortunately it is not as easy as it sounds. “We have people that have their cars parked for months in times of accident yet they have comprehensive insurance because the insurance companies are not prompt in settling claims. This is the key reason the insurance industry is not growing the way it ought to because of lack of integrity. How many of the insurance companies have integrity?
“When there is an accident involving your insured vehicle the automotive company cannot give you a car to move around, the insurance company cannot provide one in the meantime as you await claims. These are services that can be used to up the value of the insurance while the insurance company is still processing your claims. With this delay, people just go for third party policy, which is cheap and just get their cars fixed by the defaulters when accidents occur,” Dr. Odiboh said in the report.
Continuing Odiboh said a lot of people have cars but cannot afford comprehensive insurance hence third party policy becomes welcome development. “If the car is older it is the insurance that is higher so people go for third party because of its affordability. Even the insurance companies have made it attractive and then make car owners to drive carefully because in third party you take care of the person’s car you hit,” he explained.
“Odiboh however wondered many people can boast of hitting somebody and going for claims and so people go for fake insurance certificate and third party because it is cheaper. That’s why people hit others and either block the road to argue or run; if they have comprehensive insurance, they will only exchange the contact of their insurance companies. You find out that comprehensive insurance is better than the third party but for its high cost.”
He gave ignorance of some people on the benefit that third party can give them as another reason that third party insurance policy is not being regarded. It (third party) causes a lot of damages to our psyche because people fight and argue right on the middle of the road.
According to him, though third party motor insurance is cheap and easily secured it is not helpful at all.
However, he posited that stopping the policy is not a way out because if it is removed, it will be creating more room for anarchy on the road because most people cannot afford the comprehensive insurance and third party policy which is mandatory. If stopped, motorists will go with the mindset that whatever happens to my vehicle on the road cannot be covered by insurance.
According to him: “If you remove third party motor insurance, you will be creating more room for anarchy on the road. I don’t have insurance so if you hit me I turn around and hit you. I will damage your care as much as you damage mine. We can’t afford to remove third party but we should ensure that it works as it should. Also the cost of comprehensive insurance is lowered, difference between comprehensive insurance on new and used cars is much, and this should be reduced.
“To solve this problem, the automobile insurers, insurance stakeholders should come together for a dialogue on how to settle this and make it work the way it ought to so that we ensure that people don’t suffer inadequacy of these insurances.
He added, “Look the traffic police do not need to talk much if there is third party insurance. So ignorance in the land and impatience in the land both make third party motor insurance unappreciable because people do not know that their care or property can be fixed if the damage is caused by a vehicle with third party insurance. Also, they do not want to wait to go through the process of claims to secure the required fund to carry out the necessary damage or replacement.
“The security agents should find a way to remove accidented vehicles from the road, confirm who is at fault and check their third party certificate. Again how many insurance companies have the capital to handle all the complaints they get, they will be out of business looking at all the altercations on the road, they will be defaulting, some of them can’t even pay their workers. That is why they need to recapitalize. The challenge in the insurance industry is not helping the automobile industry at all.”
Also speaking during the finding was the Chief Executive Officer, Safety Beyond Borders, Mr. Patrick Adenusi who said third party motor insurance is not working in Nigeria the way it ought to because the ease of obtaining the fake made some motorist acquire fake certificates. He stressed that the fact that the motoring public do not really know the benefit of the third party insurance makes them patronize fake insurance policies.
“The Third Party is N5,000, a motorist who had fake third party motor insurance policy parted with N3,000 and when apprehended by the law enforcement agent in Ikeja, Lagos. That same day, he was apprehended by another set of the law enforcement agents in Oshodi, Lagos and he also parted with another N3,000. He spent N6,000 in one day whereas he is covered for 365 days for N5,000 premium” he pointed out.
Corroborating Odiboh’s view, Adenusi explained that in case of an accident the motorists involved are expected to inform their insurers of the incident but regrettably, he said the number of Third Party Motor Insurance policyholders going for claims are not much, instead several motorists still pay to repair their vehicle of the third party because of ignorance or impatience of the other party. “The driver on the right side or whose vehicle is damaged says they can’t wait for the insurer fo fix their vehicles, so, the cost is borne by the motorist at fault, he noted.
From the angle of insurance companies, Mr. Olatunbosun Akiniosotu of Business Development Department, Cornerstone Insurance, according to the report, confirmed that there are a lot benefits in Third Party Insurance which covers third party property damage to the tune of N1 million.
He explained that it is the insured that is responsible for an incident or accident that makes the claim but does not benefit. Rather the insurance company bears the damage he has caused somebody.
He disagreed that claim process is cumbersome, saying that it is only when the insured presents a fake policy. Oftentimes they have not bought from the right office but licensing offices. They may falsify the names of the company but when they bring the policy when issues for claims arise, they won’t be able to make claim, he explained.
He added that some insurance companies may have a relationship with licensing offices to sell their third party motor policy but that it makes claiming process tedious, so it is better to go to the insurance company, pointing out that people do come for third party settlement in Cornerstone Insurance Company.
According to Akiniosotu, the company has a couple of times taken steps to create awareness on the importance of third party motor insurance through radio advert, adding that he was sure other insurance companies are doing so in agitating and engaging the public.
At LASACO insurance Plc, the report stated that it was gathered that true to an extent, the ration of claims under the third party motor insurance is not as high as comprehensive insurance because most Nigerians believe that third party is just for them to move their vehicles from one place to another without disturbances from the police officers on the road or other law enforcement agents.
A source from LASACO speaking under the condition of anonymity said some of the time the defaulters that are insured settle themselves when there are eventualities involving the third party property damage. He stressed that “paying third party claim is a problem too because there has to be a confirmation of who is at fault. If you have up to 50 vehicles on third party policy, people that come for claim may not be more than two.”
“The law concerns itself with bodily injury and death and add-on by the insurance company – Motor Ordinance Act of 1945. But beyond bodily injury and death, there is also a third party property damage which is not limited to motor vehicle but limited to any property that belongs to the third party such as fence, wall, shop etc that the third party insured vehicle caused,” he explained.
He added, “Fake third party motor insurance policy is done by most people without knowing it is fake, because it is the same amount with the original. License racketeers are promoters of fake third party policy, though this has stopped now because the Nigeria Insurance Association (NIA) has created a portal – www.asknia.org to check the validity of all motor insurance policies in Nigeria.
The source said often times people are not aware that there may be third party insurance on the car they are driving especially when the owner is not the person driving the car hence if there is any accident, the person may want to repair the vehicle or property it damaged.
According to the report, when Mr. Kayode Ahraham of LASACO Insurance Plc was contacted, he said that there is also a wrong perception that claims will take a long process because in LASACO as long as you have done the right thing, it will take one week.
“Every claim is treated on its own merit. We do not look out for fraud. We take picture of the accident and we have LASACO Blue Response (our brand colour carried out by a group of young mechanical engineers in our employ. The idea is to get on-the-spot assessment of the scene of accident and do a report summing the amount of damage and the moment the owner of the insured vehicle guarantees it, in two days you get the alert in your bank account to this effect. That is, the moment the owner agrees, we pay almost immediately to the third party.”
Speaking on behalf of the National Insurance Commission (NAICOM), the insurance industry regulatory agency, Head, Corporate Communication/Director, Commissioner’s Directorate, Mr. Abdulrasak Salami, the reported stated, reiterated that the third party motor insurance policy has a lot of benefits, except that people do not take advantage of it due to ignorance.
He did not see the reason for the policy to be scrapped, but warned that people should avoid buying fake polices from fake agents. He encouraged motorists to follow the normal process of going to the insurance companies or through their intermediaries. “There is a process and you most follow that process to get the right policy, otherwise there may be delays and complications when issues of claims come up,” he said.
Salami informed that the agency has been creating awareness on the need and benefits of third party motor insurance policy and will continue to do so, adding that there are interventions from NAICOM when there are disagreements in settlement of claims between the insurer and the insured.
“The policy is to protect third party victims and it is good and beneficial just that people do not take advantage of it because of ignorance and the fact that if it is damage, I will fix it, but it goes beyond that.
“The challenge is that in most cases, people go to purchase fake policies, they don’t go to the insurance companies. There is a process, go to the company or you go through the intermediary. If you go to the licensing office when you have an issue, who do you go to, is it the licensing agent that will settle you?
“If you don’t take up a policy from the insurance company and when there is an issue, you want to go to the company? The insurance company will want to verify and this can cause delay. Also there is the issue of fraudulent claim people wanting to claim what does not belong to them, the insurance company will ask questions and investigate properly.
“Where we NAICOM come in is when the company has identified and accepted liability and there are still delays. Also when the insurance company has investigated and refused to pay, the insured can come to us. Then we come in and adjudicate. NAICOM has a department dedicated to complaints, when you have issues go there,” Salami said in the report.
He however noted that “creating awareness on the benefits of the Third Party Motor Insurance Policy and how it works remains important and this NAICOM has been doing but it is an ongoing thing. It is not a one-off thing and we will continue to do that.”
“Despite the challenge in Third Party Motor Insurance Policy, it was gathered that Anchor Insurance Company Limited has devised a mean of marketing this policy, recording up to a billion naira in one year only on the third party motor insurance policy hence the company is being regarded as the Third Party expert in the industry,” the report stated.
