‘No Premium No Cover’ strengthening consumer position in contract

Insurance sector in Nigeria has existed in the last 50 years without a consumer friendly perception that taking insurance as a means of protection is worth its while, since it is generally believed that insurance companies do not pay claims.

While this perception may not necessarily be right given the huge sums of money paid out annually as claims by insurance companies and the number of people and families that have benefited from insurance, a few patches of claims issues in the industry still make the sector look as perceived.

This poor perception and low confidence has not only slowed and robbed the sector of its growth potential and contribution to the country’s GDP, it has also cost potential consumers some life fortunes as they had to carry their risks and bear their losses themselves.

In trying to change the perception and offer more protection to the insurance consumer, the industry regulator, the National Insurance Commission (NAICOM) four years ago came up with its Market Development and Restructuring Initiative (MDRI), a medium-term plan to reform the areas of industrial capacity, market efficiency and consumer protection.

This was further extended in 2013 when NAICOM decided to enforce credit policy of “No Premium No Cover”, a provision of section 50 (1) of the insurance Act 20003 which states that “the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of the insurance risk unless the premium is paid in advance.”

In implementing the law which became effective January I, 2013, NAICOM warned that any insurance company found within its books with unpaid premium for policy granted to clients would be sanctioned or will have its license revoked.

The whole idea in promoting the policy is that insurance companies having received premium from the insured as and when due have the obligation to pay claims when it arises without any excuses.

While this policy does not only give the insurance companies the opportunity to build capacity by investing premiums on time and generating good returns that would enable them pay future claims when they arise, it becomes a moral burden not to pay the consumer when there is a loss.

Here again, the consumer’s right to ask for claims becomes further enhanced having paid premium to purchase cover.

Today, the consumer is better protected and also given the opportunity to seek redress at no cost when not satisfied with any insurance company’s services through the Consumer Complaint Bureau, a department in NAICOM established to address consumer claims issues.

This has become a great success and hardly would you find a consumer, who has paid premiums and is denied claims when the risk crystallises.

By: Modestus  Anaesoronye