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Operators united against fake motor, marine insurance

By on December 9, 2014

Statistics from the Nigerian Insurers Association indicate that about 76 per cent of certificates being circulated in the marine sector are fake; while 75 per cent of certificates used by motorists are not genuine.

Marine and motor insurance policies are two relevant areas where the country’s laws require stakeholders to have insurance certificates. Because of these mandatory requirements, many people have continued to buy fake papers at cheap rates.

Drivers and importers often present such fake papers to law enforcement agents to show they have complied with the law.

The Group Managing Director, Mutual Benefits Assurance Plc, Dr. Akin Ogunbiyi, says poor awareness is not the only reason a lot of motorists patronise fake vendors.

He observed that most insurance firms were concentrated in big cities and those in remote areas had less access to them. A reason, he noted, had allowed fake vendors to continue to proliferate fake certificates.

Statutory insurance requirement

The Nigerian law mandates all importers who bring in goods through the country’s ports to fulfil the requirement of insuring cargos with a local insurance company.

Specifically, Section 67 subsections 1 of the 2003 Insurance Act says, “Insurance in respect of goods to be imported into Nigeria shall be made with an insurer registered under this Act.”

Section 67 subsection 4 adds that “an importer, broker or agent who effects any insurance otherwise than in compliance with the provisions of this section commits an offence and is liable on conviction to a fine of N500,000.”

The Insurance Act 2003 also mandates all motorists to have a minimum of third party motor insurance policy.

Section 68 of the 2003 Insurance Act states, “No person shall use or cause or permit any other person to use a motor vehicle on a road unless a liability which he may thereby incur in respect of damage to the property of third parties is insured with an insurer registered under this Act.’

It further explains that the insurance of this section shall cover the liability of not less than N1m.

According to the Act, a person who contravenes the provisions of this section commits an offence and is liable on conviction to a fine of N250,000 or an imprisonment of one year or both.

Marine insurance policy

Marine cover is the policy to provide insurance compensation for losses or damage of cargo, ships, terminals, and any transport or cargo moving from the point of origin to its destination.

According to the international practice, it is the duty of the supplier of goods to provide a cover before lading, while importers provide an insurance cover from lading to destination.

To compensate the importer for any unforeseen damage or loss that may occur during transit, the importer is expected to have an insurance certificate.

The Managing Director, Anchor Insurance Company Limited, Mr. Ademayowa Adeduro, notes that Nigeria is a large importing country, but expresses worry that the insurance premium earned on goods imported is low because most of the importers have continued to patronise fraudsters to get fake papers.

According to him, an average of 0.15 per cent is usually charged on clause C policy, which covers damage to goods destroyed while on transit, either through sinking or other means.

Policies under clause A, he explains, have comprehensive cover, which covers goods from the originating country to the destination country and the rate charged is usually about 0.34 per cent.

Motor insurance

A motor insurance is statutorily mandatory for all motorists to have before they can drive their vehicles on the road. The essence is to ensure necessary compensation for any accident that the motorist may cause to other road users.

Motorists are however required to pay premiums to insurance firms who will thereafter take liability for any damage the driver may cause as a result of an accident.

The Managing Director of LASACO Assurance Plc, Mr. Olusola Ladipo-Ajayi, says an authentic motor insurance will protect the motorists against third party liability if he causes an accident.

Again, he explains that if the insured driver is charged to court for any damage caused with his vehicle, the insurance company will provide him with a lawyer to defend him in court.

The only thing that the insurance company cannot do for the motorist, he notes, is to take care of the penalties that he needs to suffer in criminal law.

“If damages are awarded, then the insurance companies will take up the limit of the liability. It covers the third party damage or body injury and vehicle damage,” he adds.

Efforts at eradicating fake papers

In 2011, the National Insurance Commission, in conjunction with the Nigerian Police, commenced raids in places used by fake insurance vendors.

It made such raids in different parts of the country such as Abuja, Lagos, and Enugu, and arrested many fake vendors.

The Commissioner for Insurance, Mr. Fola Daniel, says the fraudsters are in the habit of deceiving unsuspecting motorists by selling fake third party insurance certificates to them.

He urges motorists to patronise insurance firms and brokers to purchase genuine insurance certificates.

In addition to this effort, the industry has considered the need to migrate from paper insurance certificate to an electronic method for easy verification of genuineness of the papers.

On this ground, the Nigerian Insurers Association, the umbrella body of all insurance firms has introduced e-certificate known as the Nigerian Insurance Industry Database.

Nigerian Insurance Industry Database

The NIID aims to provide information on the details of vehicles available on Nigerian roads, as well as helps in the verification of fake certificates.

Before efforts by NAICOM and NIA commenced on the fight against fake papers four years ago, NAICOM had said that 90 per cent of vehicles on Nigerian roads were fake documents. Presently, the figure has reduced to 75 per cent, according to the NIA.

The Director-General, NIA, Mr. Sunday Thomas, says the NIID is an electronic means which allows drivers to verify the authenticity of their certificates.

According to him, policyholders whose vehicle insurance details have been uploaded on the NIID can check their motor insurance policy status through SMS and on the Internet.

He says the NIID is a joint initiative of all insurance firms in the NIA, adding that it has concluded its packaging which is structured for the marine sector.

Thomas told our correspondent that as of October, only 2.7 million vehicles had been registered by licensed insurance firms under the NIID.

He notes that this is a significant improvement over a figure of more than a million which was recorded in the corresponding period of 2013.

According to figures from the NIA, 11.4 million vehicles were registered across the states in the country by the Federal Road Safety Corps in 2012.

This means that at least, 8.75 million vehicles moving on Nigerian roads are operating without genuine insurance certificates.

After seeing the improvement made by the NIID in reducing fake papers in the motor insurance sector, Thomas says similar progress will soon be made in the marine sector.

He says the NIID will help the Nigeria Customs Service to verify authentic certificates because touts have been proliferating fake insurance certificates.

“What we are doing right now is that we are test running it; we want to fully deploy it for the first three months and see the performance and the value-added to the system in the marine sector,” he says.

According to him, the association has identified the stakeholders in the process such as banks, the customs, clearing agents and importers.

The NIA boss explains that if an importer borrows from the bank and uses fake paper for the purpose of getting a clearance and something happens, to repay the loan can be difficult.

With genuine insurance, he says that the interest of the lender is fully protected and the importer will be able to continue with business when claims are settled.

Thomas says, with the introduction of the NIID, the customs can no longer be deceived because they can verify the genuineness of the insurance document from their desk.