FG pays N10.7bn premium for 2013/14 group life insurance

The federal government has paid about N10.7 billion premium for group life insurance of its workforce including the civil servants, police and the military for the period 2013/2014.

Released from the Office of the Head of Service of the Federation, the premium covers the period December 2013 to December 2014, with 3 percent discount granted the government as part of insurance industry contribution to encourage the police and the military.

Section 9 (3) of the Pension Reform Act 2004 stipulates that every employer both in the public and private sector to whom the Act applies must maintain Life Insurance Policy in favour of the employee for a minimum of three times the annual total emolument of the employee.

The policy provides cover to the insured against death and the insurance cover is mandatory for all employees as long as they are in employment. This means that the policy provides for the payment of the sum assured in the event of the death of a member of the scheme from any cause, natural and accidental.

Analysts who spoke to BusinessDay said this will mark the beginning of government’s compliance with the No-Premium-No-Cover policy which commenced January 2013, requiring that payment of premium be made before commencement of policy.

Though they were worried that premium for January to November 2013 as well as about N5.5 billion balances of 2012 could not be paid yet, they believed that with Nigeria’s budgeting timetable now government would be in position to meet its insurance payment at the beginning of each renewal.

Larry Ademeso, managing director, Custodian and Allied Life said it’s positive development for the insurance industry, and good business as well.

Ademeso stated that the reason a lot of people see insurance as not contributing enough to the GDP was because it had been clouded with huge receivables. “With this payment coming at the commencement of the cover period, insurance companies would be in better position to contribute to the economy and create the expected value, he said.

“The National Insurance Commission deserves every commendation for standing tough to say ‘No Premium No Cover’ and to enforce it up to the level of government.”

According to the guidelines for life insurance policy for employees jointly issued by the National Insurance Commission (NAICOM) and National Pension Commission (PenCom), the employer is required to fully bear all costs in relation to procurement of this policy, and this shall be in addition to the contributions to be made by the employer to each employee’s Retirement Savings Account.

Life insurance policy involves the payment of a premium to the insured against the death of an employee either by natural or accidental causes. It is wholly paid for by the employer and enjoyed by the employee if the death occurs prior to terminal date.

The policy can also provide for accident at work that results in permanent disability as well as cover for burial expenses by way of extension to the policy. It therefore demonstrates to employees that the employer places a great premium on their lives and contributions to the development of the organisation.

By: Modestus  Anaesoronye