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Third Party Insurance: The billion naira sinkhole

• 12 million vehicles policy fake, says Insurance Broker

• We buy third party insurance policy to escape police’s troubles –Motorists

• ‘Many road accidents are resolved with quarrels, fisticuffs’

 

For fear of being arrested and their vehicles impounded by law enforcement agencies for putting vehicles on the road, without insurance policy, Nigerian motorists usually go for the cheapest Third Party Motor Insurance policy. The move is to have uninterrupted access to the roads, devoid of harassment. But most motorists do so without knowing they could make successful claim
for compensation from their insurers in an event of accidents where they are not at fault. CHIJIOKE IREMEKA reports

 

In Nigeria, it’s an unavoidable reality to have motor insurance before keeping a motor vehicle on public roads. Since most Nigerians buy insurance just to get  cleared from law enforcement agents on the roads, they go for third party motor insur-ance, which is a lot cheaper than compre-hensive policy.

 

Consequently upon the preconceived no-tions that third party insurance policy is just to beat the law enforcement agents, many don’t realise that a third party policy is actu-ally legal and indemnifies the insured from third party losses.

 

Third-party only insurance (TPO) offers one the legal minimum level of car insur-ance cover, and it’s the most basic one is able to get. This kind of policy protects other peo-ple’s vehicles and property in the event of an accident that was deemed to be one’s fault.

 

For instance, if one drives into the rear of someone’s car, causing damage to the bum-per and injuring the driver, the third-party insurance would cover the cost of the other person’s car and medical expenses. What is not covered is damage to your own car or any injuries you suffer. For that, you would need a comprehensive insurance policy. Oth-erwise, those costs are on you.

 

Sunday Telegraph learnt that the third par-ty insurance does not cover a person and his motor vehicle. Rather, it covers one’s legal liability for the damage one may cause to a third party only, such as bodily injury, death and damage to third party property, while using your vehicle.

 

Unfortunately, a lot of cost for vehicles in-volved in accidents, which ordinarily would have been repaired by the insurance compa-nies are borne by the car owners. For a third party motor policy, the first party is you; the second party is the insurance company while the third party is everyone else.

 

A comprehensive motor insurance policy, typically has two insurance covers bundled together -the third party insurance and the own damages’ cover. Some also come with a built-in personal accident cover.

 

As the names suggest, the ‘own damages’ and ‘personal accident’ insurance compo-nents are to cover personal losses, damage to your car or personal injuries, disability and death, respectively. While the above two are optional covers, third-party insurance is compulsory for all vehicle-owners as per the Motor Vehicles Act.

 

For this reason, standalone third party in-surance policies are often called ‘Act only’ insurance. Your third party insurance does not cover you and your motor vehicle. It cov-ers your legal liability for the damage you  may cause to a third party only while using your vehicle.

 

Accordingly, third party liability coverage is part of the basic motor policy and covers one for claims made against him by other drivers after a crash but many motorists are not aware of this, while those who are aware would not want to waste their time going for long period of claim processes.

 

Section 3 of Motor Vehicles (third party  insurance) Act mandates users of motor ve-hicles to be insured against third party risks.

 

According to the provisions of Section 3(1) “no person shall use (put on the highway), or cause or permit any other person to use a motor vehicle unless there is in force in rela-tion to the user of that motor vehicle by such person or such other person as the case may be such a policy of insurance or such a secu-rity in respect of third party risks as complies with the provisions of this Act.

Section 3(2) warns that, “Any person act-ing in contravention of this section shall be liable on conviction to a fine of N400 or to imprisonment for one year or to both such fine and imprisonment and a person con-victed of an offence under this section shall be disqualified from holding or obtaining a driving licence.”

Sunday Telegraph learnt that these posi-tions of the Act were what have sent cold shivers to spine of most motorists who only purchase the Third Party Motor Policy to es-cape police harassment while on the road, not knowing that the policy can indemnify the third party’s vehicles in case of an ac-cident.

Thus, Mr. Adejumo Rasaq is one of Nige-rians who ignorantly buy third party insur-ance policy without knowing that he could make claim from his insurer to repair the third person’s car in a case of an accident where he is at fault.

 

He said: “We ignorantly buy third party motor insurance policy without knowing that we are entitled to claims making. Also, the comprehensive policy is expensive, and this is one of the reasons most motorists go for the third party policy. Even with the comprehensive, for you to make a claim in Nigeria and get your case sorted out, is a tough walk.”

 

In most cases, he noted, one doesn’t need to start a tiring process of writing letters, getting a lawyer and going through stress over something that can be settled within a couple of minutes, whether or not you have the resources.

 

He opined that the insurance companies may have made the process of making

claim so cumbersome and a strategy to frustrate the insured and make them forget about the policy, adding that Nigerians who are always in a hurry to achieve results will not want to wait and therefore, making free money for the insurance companies on yearly basis.

For him, one needs a comprehensive insur-ance policy to cover his own loss and for this reason, one can wait if such incident occurs.

According to a 38-year-old commercial bus driver, Kelvin Oyi, who plies the Oshodi-Ikorodu route, most drivers, including him, buy third party motor insurance policy to escape the law enforcement agents and their constant harassment on the road.

“We buy third party insurance policy to escape law enforcement agents’ trouble. We know that it is a way of dashing money to    insurance companies but we can’t stop be-cause of the police, VIO, and FRSC’s troubles. We know that they get something from that money we pay,” he said.

He, however, added that for some years running now, he has not been paying money to get third party motor insurance policy since he has to grease the palms of the law enforcement agents as well as the traffic en-forcement officers.

Chibuzor Okpala, a father of two, is yet another commercial driver (interstate), who doesn’t care about his right to compensation of claim but feels that the best way for him to have uninterrupted flow in his driving busi-ness is to ensure that all his vehicle papers are complete.

He argued that since he pays over N15, 000 for him to renew his motor papers on yearly basis without refund. Hence, there was no need seeking claims from his insurer, which in most cases; he doesn’t know where it comes from, as insurance brokers do the job for him.

“My own is to get the papers and go my way. I never knew I could make claim for my third party motor insurance policy. I don’t like being disturbed when driving. I run from Lagos to Onitsha and I don’t like those police or Road Safety personnel stopping me at will and wasting my time. “So, I try as much as I can to avoid them by ensuring that my pa-pers are okay,” he added.

According to an insurance expert, Mr. Basil Amobi, making a third party motor claim is not easy, saying that “the complex course begins with filing a report with the police and obtaining a charge sheet, which, as we all know, is a mammoth task in itself.”

 

After this, he noted, one has to approach a motor claims lawyer, who files a case in a special court, the Motor Accident Claims Tribunal as civil courts cannot decide road accident compensation claims.
“The case has to be either filed in the tribu-nal with jurisdiction over the area where the accident occurred or with the tribunal with jurisdiction over the area where the claim-ant or the defendant resides. The court then hears both sides, examines the evidence, and fixes the liability. If the decision is in your favour, you get compensated for your loss,” he added.
“Going to the insurance company for third party insurance claim is a waste of time. Those who have comprehensive insurance policy find it difficult to get compensation in the case of accident. How much more the third party insurance policyholder. It doesn’t worth it. This way, we are making money for insurance companies without claims,” said an international businessman, Igwe Godwin.
However, Sunday Telegraph gathered that this three-step process is not all that simple as rules differ according to scenario and the insurance coverage that both parties have. This makes the ground reality far more com-plicated than what it appears on paper.
For instance, if your car injured a pedes-trian, the insurance company will pick up the medical bills and thus save you from being torn apart by the relatives of the injured.
Sunday Telegraph learnt that the claim one can make on an auto insurance policy is limited. For example, an auto insurance policy may only cover loss up to a certain amount, say N1, 000, 000. This means that if the vehicle you damaged is worth more than that, the insurance company will only provide N1, 000, 000.
More importantly, it was learnt, as soon as the insurer thinks one is not acting ‘in good faith’, in other words, they think one is trying to rip them off, they will refuse to pay the claim, cancel your insurance, report to the police for fraud and put you on a blacklist.
Corroborating Okpala’s position, Abiola Adebowale, an insurance broker, said, though it is legally possible, insurers hardly receive cases claiming third-party compen-sation for only vehicle damage. “People are advised to settle it out-of-court as the process is not only cumbersome but highly time con-suming,” he quipped.
He continued: “Third party claims are filed for injury and death but settlement of these also takes a long time. On an average, in third-party claims involving bodily injury, the turnaround time is one to two years. In case of death, it takes about three to four years to settle claims.
“Obviously, unless one does not have a comprehensive cover, no customer is willing to take so much trouble for a small crash that can be swiftly settled with an own-damage’s claim, even if it means losing out on the No Claim Bonus (NCB).”
He described NCB as a reward given by an insurance company to an insured for not rais-ing any claim requests during a policy year, saying that NCB is also, a discount ranging between 20 to 50 per cent and is given to the insured while renewing a policy.
According to Barr Charles Ndukwe, in a case of injury, one can claim medical expens-es, compensation for physical disfigurement and also for loss of earnings if you are unable to work after the accident.
“In case of death, the dependents of the de-ceased can claim compensation on the basis of the income lost. Medical expenses can also be claimed for treatment of the injury that was the cause of death. For property dam-age, surveyor’s report, original bills from an authorised garage and motor vehicle inspec-tion report are required to quantify the loss,” he said.
“If you are successful in your compensa-tion claim, then you would be paid (up to the limits in the policy) by the other person’s insurer under his/her third party insurance policy,” he added.
Speaking on the benefits of insurance pol-icy, Mr. Yemi Soladoye, an insurance expert, said the greatest asset insurance bestows is the absolute peace in case of most traumatic  moments of one’s life.
“A dying man, who is insured for life, would breath his/her last in complete peace, knowing he/she can pass away without fret-ting over the financial state of his/her family. In automobile accident, you do not lay down in a panic attack, if the vehicle is properly insured,” Soladoye said.
More so, Mr. Nwachukwu Chigbo Good-luck, from Lagos says: “I have received the sum of N2, 760, 000 into my account. This being the amount paid to me by AXAMAN-SARD for my insurance claim on my badly damaged car.
“I am happy to tell you that I’m so proud to be insured of this company. I have always believed in this insurance company. I am sharing my experience today with my fam-ily, my friends, my colleagues and to those  who thought that this will never happen,” he enthused.
However, in spite of the immense benefits of Third Party Insurance Policy, according to the Managing Director/Chief Executive, Titan Insurance Brokers Limited, Francis Ewherido, only two out of eight vehicles on the road have genuine motor insurance.
He noted that an estimated 12 million ve-hicles with insurance policy are fake, saying that many Nigerian third party road users would have no access to any compensation in the event of bodily injuries, death or dam-age to their property as an implication.
He stressed the fact that aside the wide-spread of ignorance about this policy, many road accidents are resolved with quarrels and fisticuffs, saying that with an estimated 12 million fake policies, Nigeria’s revenue loss

 

 

 

comes to about N60 billion annually (N5,000 X 12 million vehicles).
He said: “Revenue losses to government are also enormous: billions of Naira in value added tax, remittances to the National Insur-ance Commission, company income taxes and pay as you earn (PAYE). This is what a few, who do not pay taxes on their transac-tions, have denied the rest of us.”
Speaking on the way forward, he said: “There is a simple remedy to the avalanche of fake motor insurance policies. The um-brella body of underwriters in Nigeria, the Nigerian Insurers Association (NIA), has a platform, the Nigerian Insurance Industry Database.
“It has a database of all genuine motor insurances issued by Nigerian insurance companies and so far, has records of over four million genuine motor policies in the database. You can check the status of a mo-tor policy either with the policy number or registration number of the vehicle.
“But, I guess this all-important database has either not been given enough publicity or it is not worth the while of many policy holders to check the status of a policy that costs only N5, 000. And many law enforcement agents have taken advantage of this mindset. They have not helped the industry, in particular, and Nigerians in general.
“They go to the road to check vehicle par-ticulars not for love of mankind, Nigeria or the insurance industry, but because of what they can get from defaulters or gullible and ignorant vehicle users.
“Most mention, however, must be made of the few law enforcement agents who call insurance companies to confirm the authen-ticity of the motor policies purportedly is-sued by them or access the NIID right there on the road to confirm the authenticity of a policy. Only if the good law enforcement agents were in the majority…”

 

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