Enforcing Compulsory Building Insurance-Nigeria

Ebere Nwoji writes on recent efforts by the National Insurance Commission to enforce compulsory building insurance

The National Insurance Commission (NAICOM) and the Federal Fire Service recently held a joint meeting targeted at enforcing compulsory public building liability insurance.

The resolution has been described by insurance industry stakeholders as a welcome development and a step in the right direction.

But to the insurance industry observers, there is the question on the actual modalities and the force the commission and the Federal Fire Service would use to ensure that the enforcement this time works out.

This question came to the fore because this is not the first time the Commission is making this type of move concerning this policy.

In October 2010, the Commission, under the leadership of Mr. Fola Daniel, as the commissioner for insurance, had staged a major launch of this same policy in Abuja.

The manner the Commission staged the launch, reeling out strategies it will use to ensure that the implementation and the enforcement was made effective raised great hope in the minds of insurers to the extent that the insurers, projected then that the policy was capable of yielding minimum of N10 billion every year to their accounts.

After the launch, nothing was heard again about the enforcement of the policy while most buildings in the country still existed without insurance cover.

Again in October 2017, NAICOM, inaugurated a technical committee that would drive the enforcement of public building insurance in Nigeria.

The committee was made up of representatives of NAICOM, the Federal Fire Service representatives of states fire service from the six geo-political zones and the Nigeria Insurers Association (NIA).

Since then nothing has been heard about the work or achievement of the committee

When THISDAY enquired on why the compulsory building insurance along with other five compulsory insurances have not been enforced using security agencies, the response was that inadequate and ineffective framework for the insurance industry have remained major challenge militating against such enforcement and must be tackled for the industry to make headway in critical issues like enforcement of the compulsory insurances.

The 2003 insurance Act, defines a public building as one to which members of the public have access to for educational, recreational, medical and commercial purposes. The penalty for non-compliance is a maximum fine of N100, 000 or one-year imprisonment or both according to insurance Act 2003.

Section 65, sub-section 3 of the Insurance Act 2003, requires the owner or occupier of every public building to be insured against liability for loss or damage to property or death or bodily injury caused by collapse, fire, earthquake, storm or flood.

The public building liability insurance, is one of the five compulsory insurances stipulated by the insurance Act 2003 but which has been dormant without implementation. Yet, cases of collapse buildings and destruction of lives and properties for which it is meant to protect occur every day.

This, according to the industry stakeholders indeed, made the latest decision by both NAICOM and the Federal Fire Service to move towards enforcement of the building insurance a good development and a course that must be pursued with vigor.

This is because in recent years, there has not been a rainy season that passed without record of cases of building collapses in one part of the country or the other.

Against this backdrop, as this year’s rainy season is fast approaching, the Commission’s latest effort concerning the implementation and enforcement of the compulsory building insurance has become necessary to cushion against effects of impending losses from building collapses.

But the Commission has got an onerous task of ensuring that its current zeal in the policy enforcement this time, does not go the way of the previous moves.

A flash back at cases of building collapses in different parts of the country with the attendant destruction of lives and properties brings to the fore, the relevance of enforcement of this particular policy.

For instance, in March 2019, a three-story building housing a primary school with pupils and other occupants in the Ita-Faji area of Lagos Island Local Government, collapsed, killing many people including the proprietress of the school and school children.

When THISDAY visited the collapsed building site, it was discovered that the building had no insurance cover and none of the dead or injured victims had any form of insurance. Indeed, one of the land owners in the area told THISDAY that houses in the area had no insurance and that most landlords in the area have no knowledge of insurance.

Shortly after that, in Apo Mechanic village Abuja, a story building collapsed, trapping six people. Also, after that, there was report of another similar case in Ibadan.

Similar to this in recent times, fire outbreaks in markets which also constitutes public building have become more frequent.

The latest was the recent fire outbreak in Katsina State main market in which properties worth millions of naira were destroyed.

Unfortunately, when these happened, with the exception of the Ita -Faji case where the Lagos State government took care of the hospital bills of the victims, especially the school children, both the dead and surviving victims were often left to their fate.

For the dead victims, their dependents are often left without any form of compensation mainly because in most cases, owners of the building ran away for fear of facing the wrath of the law.

In Nigeria, it is fast becoming the custom to expect government to take responsibility of certain things common knowledge should teach people to do to stay safe especially insurance cover.

Insurers themselves often lament that instead of encouraging people to take insurance cover, government in few cases resort to giving out paltry gifts to the victims.

The former president, Nigeria Council of Registered Insurance Brokers and Managing Director Scib insurance Brokers, Mr. Shola Tinubu, said this is not the right solution to ameliorate problems faced by people when the unforeseen happens.

According to him, Nigerians ought to embrace insurance so that anytime the unforeseen happens, they will be entitled to more valuable compensation that will restore them to the position they were before the unfortunate event happened.

Government, after the 2012 flood that rendered many people homeless, had mandated that people who built their houses near canals and other flood passages should remove such houses and look for safer places, but till date, people are still living in such areas and have not cared or planned for the unexpected.

Presently, people are still occupying houses with shaky foundations while developers still use fragile materials and substandard ones to erect new buildings despite cases of collapse of new buildings with faulty foundations around the country.

Section 64 of insurance Act 2003, stipulates that for insurance of buildings under construction, every owner or contractor of any building under construction with more than two floors must take an insurance policy to cover liability against construction risks caused by his negligence or that of his servants, agents or consultants which may result in death, bodily injury or property damage to workers on site or members of the public.

This insurance policy also covers liability for collapse of buildings under construction. Failure to comply with this provision is an offence punishable with a fine of N250,000 or three years imprisonment or both.

Despite these laws, house owners and owners of building under construction care less about insuring their houses.

But insurers have stressed that this is not supposed to be as insurance firms are set up for the purpose of mitigating risks.

According to them, if Nigerians can take insurance covers especially the compulsory building insurance when there is collapse of this nature, insurance companies would be there to compensate them.

To the Managing Director, Consolidated Hallmark Insurance Plc, Eddie Efekoha, if there is time Nigerians should embrace of this nature, it is now that insurers are focusing on retail insurance that covers individual policies like building, life, and motor insurances as the corporate insurance has been saturated and over marketed.

While encouraging Nigerians to protect their personal belongings through insurance cover, he urged insurers to look critically into retail insurance areas that take care of such policies.

The Lagos State Government in pushing its compulsory building insurance law, said it would synergise with a consortium of insurance companies and NAICOM to achieve this.

It was of the view that if residents in Lagos embraced building insurance policy, it would save them from untold hardship, losses and the hopelessness associated with emergency situations.

It also stressed that insurance companies have the financial capabilities to compensate and pay claims to victims of disasters than government.

This decision by the state government then, was in line with long standing crusade by both the insurance industry regulator, NAICOM, the umbrella body of insurance underwriters, the Nigeria Insurers Association (NIA) and other stakeholders in the industry on enforcement of compulsory insurance nationwide.

They have for many years been agitating for implementation of sections 64 and 65 of the 2003 insurance Act. Its enforcement has been lying low until when NAICOM in collaboration with the industry operators kicked off campaign on the enforcement in the six geopolitical zones of the country.

The expectation was that by now, everybody would have embraced this policy and a significant number of buildings in Nigeria covered by the insurance policy.

But this has not happened because according to the commissioner for insurance, Sunday Thomas, the prevailing 2003 insurance Act did not vest on NAICOM necessary powers for enforcements.

He said this is why the industry needs accelerated passage of the new bill which it has been waiting for.

insurance expert, Mr. Kola Adedeji, had said the inadequate and ineffective framework for the insurance industry are challenges that must be tackled.

In the case of compulsory building insurance, he said there is no separate enactment for compulsory insurance of public buildings.

He noted that this inadequate legal framework makes it completely difficult to enforce the provisions.

Pointing out its other pitfalls, Adedeji said: “The policy is meant to cover legal liabilities of either owner or occupier at what point in time does the occupier have legal liabilities or insurable interest in the building he or she is occupying?

“Despite these pitfalls, Lagos State government in 2017, took the bull by the horns to enforce the law by ensuring that owners of buildings in the state put in place insurance cover for the third party.”

On the question of the insurance operators themselves especially NAICOM using its workforce to enforce the policy, insurance industry observers argued that using insurance operators for enforcement would not yield much result because the insurers had often said they were handicapped in enforcing the policy because they find it difficult going into any standing building or building under construction and to ask for insurance policy paper.

The insurers have always wished the law enforcement agents would be assigned to act on their behalf.

But the Managing Director NEM Insurance, Mr. Tope Smart, said Nigerians should learn to be safety conscious and to be sincere to themselves especially on things that affect their lives like the building insurance.

According to him, if a Nigerian can have money to erect five story buildings, the person was supposed to think about the safety of the workers and users of such building.

Industry observers are of the view that given rising cases of building collapses and damages it cause in different parts of the country, where they fail willingly to do that, government through the proposed Insurance Bill, whose passage the industry is earnestly waiting for, should empower the Commission to use the law enforcement agents to compel people to insure their buildings.

By This Day.