Issuance of Motor Insurance Certificates: How VIOs “Displaced” Insurers
By Ekerete Olawoye Gam-Ikon ( First published on www.proshare.co)
Many years ago, before the implementation of the “No Premium, No Cover” regime derived from the Insurance Act 2003, anybody or organization that wanted insurance coverage for their vehicles would be issued a Cover Note for 30 days by their insurance companies.
Whether you took Third Party or Comprehensive Motor Insurance, the Cover Notes would provide the same security as the Motor Insurance Certificate and Policy in the event of any unexpected occurrences during the 30days period.
Considering that one requires evidence of insurance to obtain Vehicle Licence, the Cover Note served that purpose and the policyholder will return to the insurance company with the copy of the Vehicle Licence because it is one of the required documents to obtain insurance coverage for vehicles.
Put succinctly, you need evidence of insurance coverage for your vehicle to obtain Vehicle Licence, on one hand, and, on the other hand, you need copy of the Vehicle Licence to obtain insurance coverage for your vehicle.
With the 30days Cover Note issued by insurers, it was easy to follow through the process and fulfil the requirements of both the Vehicle Licensing Office and the Insurance Companies.
However, since the implementation of the “No Premium, No Cover” regime, the Cover Notes became irrelevant and unacceptable. Issuance of Certificates of Insurance meant premium payments would have been fully made to the insurers.
At the end of the Vehicle Inspection Office (VIO), a gap had been created with the cancellation of the use of Cover Notes, and they simply began to collaborate with any insurance company that approached them and were willing to share part of the premium paid by individuals and organizations for Third Party Motor Insurance.
Today, it is common to see Third Party Motor Certificate of Insurance amongst the Vehicle Licence documents released by VIO to vehicle owners.
The permissible premium that individuals and organizations pay for Third Party Motor Insurance (Private) is N5,000 per year and N7,500-N10,000 per year for commercial vehicles. This is what VIO request for and receives on daily basis across the country but quite unfortunately, this is not what gets to the insurance companies!
To better understand how VIO has become the bigger winner in this ongoing process, we can simply request VIO to release the information about the number of vehicles that were given licences accompanied by the Certificate of Insurance over an agreed period of time.
This will not only disclose details of the insurance but, more importantly, provide evidence that the insurance documents were genuine.
Currently, according to an independent survey across the six geopolitical zones, the insurance sector is losing about 80 percent of the premium paid through VIO!
Also, it is not all the vehicles issued Third Party Motor Insurance Certificates by VIO that are captured on the Nigerian Insurance Industry Database (NIID) managed by the Nigerian Insurers Association (NIA). Thus, the insurance industry is losing some information and data in this regard.
Over a year ago, there was news from the insurance regulator, National Insurance Commission (NAICOM) that the premium for Third Party Motor Insurance will be increased to N10,000 with effect from January 2022. Though yet to be implemented, it might not be unconnected with the fact that at N5,000 the insurers were getting pittance as premium while third party motor claims have increased in the last couple of years.
Taking Back Issuance of Motor Insurance Certificates From VIO
As we all know, it is NOT the duty of VIO to issue Third Party Motor Insurance Certificates and the insurance industry in Nigeria should be ready to take back its responsibility with the benefits that go with it.
In an emerging digital environment as we have today, it should be possible to deploy the right technology that enables seamless issuance of Third Party Motor Insurance Certificates to vehicle owners that need to go to VIO for their vehicle licences. Also, through the use of interfacing technology, VIO can confirm the insurance certificates before issuing vehicle licences to vehicle owners.
There is no way anyone will collect revenue due to you on your behalf and the money will be complete!
As mentioned earlier, information and data that ought to be with the insurance industry will not be lost through such a process that enables users to pay directly to insurers.
It should also be noted that if the share of the insurance premium retained by VIO constitutes part of its Internally Generated Revenue (IGR), they will witness a drop in future results.
Or can VIO become a registered Insurance Broker to enable it earn appropriate and legal commission and retain some measure of the insurance premium?
The insurance industry in Nigeria needs to systematically regain control of the sources of insurance or points of sales of insurance products and services.
The time to do it is NOW when the parties through which the industry has been losing premium have agreed to be part of the Enforcement Committee recently set up in the Federal Capital Territory for the compulsory insurance.
For example, collaborating with the VIO in FCT to match the number of vehicles issued Third Party Motor Insurance Certificates along with vehicle licences for 2 weeks will reveal to NAICOM where to expend its resources. For vehicles, it might not be necessary to check for genuine insurance on the road when you can obtain the information and data from the VIO.
A number of insurance companies offer online services that enable users obtain their Third Party Motor Insurance Certificates and Policy Document (Contract) through their websites. So, I consider that they are ready for a better experience with the VIO.
Let us seek to make insurance work for us in Nigeria by considering the use of data and digital technologies than physical contacts.
About The Author
Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail olagamola@gmail.com and mobile +234-806-648-1111
Source: Proshare
