The formal implementation of the new motor premium rates kicks off across the federation today, ushering motorists into a new regime of benefits, especially on third-party insurance class.
The insurance sector regulator, the National Insurance Commission (NAICOM) had some days before Christmas, announced a set of new premium rates for the motor insurance class, and also, increased the benefits to motorists including those on the most popular third-party class to N3 million from N1 million.
Although the regulator had specified Sunday, January 1 as the kick-off date of the new rates, the date, however, fell on a weekend while Monday, January 2 was also a public holiday on which underwriting firms did not open for business.
Across the federation, however, work resumes today, Tuesday, January 3 and insurance companies will be open to handle new motor policy renewals that fall on January 1.
In the last week of 2022, underwriters and insurance brokers experienced a deluge of policyholders that had wanted to buy insurance to beat the January 1, 2023 date for the new rates.
An insurance broker told InsideBusiness that besides new policyholders that came to procure motor insurance, there were also a huge number of those who have abandoned insurance, coming back to renew at the old rate of N5,000 to beat the new rates of N15,000 for the most popular class, the third-party.
“Lots of people came to make inquiries about motor insurance but the highest request came for the third-party class. We also discovered that several of our clients that have abandoned their motor insurance came back to procure insurance at the old rate, apparently to beat the new rate of N15,000 for the third party class”, noted an official of an insurance brokerage firm along Oregun road in Lagos.
NAICOM Spokesperson, Rasaq Salami in a telephone discussion, late Monday night, ruled out an extension of the implementation of the new rates, adding that the letter being referred to, by some did not say the commission will extend the date.
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“They are only speculating, and besides, operators dont speak for the regulator'”, he said, stating that the commission will ermbark on an awareness campaign to educate the policyholders of the benefits that accrue to them in the new regime of motor insurance rates.
Under the new rates which raised premiums on the entire motor insurance class, policyholders stand to gain more from the industry as those on third party class will now earn N3 million claims in the event of an accident. The claims limit was formerly N1 million
In the circular dated December 22, 22022 from NAICOM, buyers of comprehensive motor insurance shall not pay less than five percent of the sum insured or the price of the vehicle after all rebates and discounts.
Leo Akah, the Commission’s Director, Policy, and Regulation, in the circular to all insurance institutions entitled, “New Premium Rates For Motor”, raised the claims and cost of insurance on all classes of motor insurance including motorcycles.
NAICOM also warns that failure to comply with the circular shall attract appropriate regulatory sanction.
The highest cost in the new rates is N100,000 for a commercial truck/general cartage which also fetches the policyholders N5 million claims in the event of an accident.
NAICOM in the new rates which states that third-party insurance policies are inclusive of the Ecowas Brown Card also approved a N20,000 premium for Own goods motor insurance while the policyholders will collect N5 million claims in the event of an accident. The new development fixed the premium rate on a staff bus at N20,000 while the insured can collect N3 million claims in the case of an accident.
For commercial vehicles, trucks/general cartage has a claims limit of N5 million while the new premium is N100,000; special types of insurance have a claims limit of N3 million while the new premium is N20,000, and owners of tricycles will pay N5,000 for insurance of each to enjoy N2 million claims. For the motorcycle insurance, the new premium is N3,000 while the claims limit is now N1 million.
The implication of this to the industry is an improved premium income in the class of business from the Year 2023.
Until recently, the motor insurance class has been the major earner of income for some insurance underwriters and this new development will swell their income.
The industry earned a total of N77.7 billion from motor insurance in a period of six months covering April to September 2022. The class of business fetched the industry N32.4 billion between April and June and also, N45.3 billion between July and September.
Consequently, premium income from motor insurance is expected to improve the earnings of the industry operators by 200 percent following the addition of N10,000 to the cheapest third party which hitherto was N5,000.
The commission according to the circular relies on Section 7 of the NAICOM Act 1997 and other extant laws on the implementation of the new motor insurance premium rates which is now effective.
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