Motor insurance: Insurers lose N631bn to fraudsters-Investigation

2010-11-01
THE PUNCH Newspaper- Nike Popoola

The Nigerian insurance industry lost about N631bn to fake motor insurance operators between 2005 and 2009, an investigation by THE PUNCH has revealed.

Statistics obtained from the Nigerian Insurers Association on Friday showed that the sector earned N16.4bn, N17.1bn and N24.3bn as premium from motor insurance policy in 2005, 2006 and 2007 respectively. The figures rose to N32bn and N41.6bn in 2008 and 2009.

According to the National Insurance Commission, the premium earned for each year (2005 and 2007), was only about 10 per cent of what should have been earned in the industry during the period. This translates into an annual 90 per cent loss to fake operators.

It also brings the total premium lost to fake vendors of motor insurance policy to N147.6bn, N153.9bn and N218.7bn in 2005, 2006 and 2007, respectively, translating into a total loss of N520.2bn in the three-year period.

However, according to NAICOM, the annual percentage premium loss on this policy dropped to 60 per cent between 2008 and 2009 due to efforts put in place by the commission to tackle fake certificate “hawkers”.

Therefore, the sector lost N48bn and N62.4bn, respectively, in 2008 and 2009, amounting to a two-year loss of N110.4bn to fake motor insurance operators.

Insurance experts, lamenting the activities of fake insurance operators, said the worrisome action was increasingly eating into the sector’s premium while also worsening the situations of road accident and other victims.

Speaking with our correspondent in a telephone interview on Friday, the Commissioner for Insurance, Mr. Fola Daniel, however, noted that recent efforts to reduce fake insurance certificates in the country were already yielding results.

“In the last two years, the percentage lost to fake motor insurance operators dropped from 90 per cent to 60 per cent, which shows that we are making some progress,” Daniel said.

In 2008, the National Insurance Commission ordered all insurance companies to withdraw all their agents from selling motor insurance certificates at the licensing offices. This left only the fake operators in those offices, while the insurance companies and insurance broking firms sold the genuine certificates.

The Vehicle Insurance Sticker was introduced in the industry in 2004, mainly to address the issue of fake certificates. However, its controversial implementation led to a disagreement between the NIA and NAICOM. The NIA, which had dragged the regulator, NAICOM, to court, later withdrew its suit and was given the mandate to reactivate VISER by NAICOM.

But rather than implement VISER, the NIA settled for other workable solutions to the problems caused by fake operators, in collaboration with NAICOM.

Currently, the industry is considering the use of an Information Communications Technology data system and mobile telephone text message system as a way of tracking fake certificates and shutting unrepentant fake operators out of the system.

According to industry watchers, this is the first time all the bodies that make up the insurance industry will be working together with law enforcement agencies, such as the Nigeria Police and the Federal Road Safety Commission, to tackle the menace.

Speaking on the ICT approach to the problem of fake certificates, the Technical Consultant, NAICOM, Mr. Yemi Soladoye, said that the commission planned to adopt a technological approach in which card readers and card writers would be employed by ICT consultants, who would give details of all registered insurance companies and send the data to a central portal.

He said, “NAICOM is not just using administrative procedures to wipe off fake insurance, but also looking at technological procedures under which all the motor certificates issued by old insurance companies will go to a central data.

“The ICT consultants will put in place card writers and card readers, which will write the names of the insurance companies and show them at a central portal.”

Soladoye explained that this would pave the way for a situation where there would be card readers with backup batteries that could last for up to one year, adding that each motor policy holder would also have it.

“By the time the Nigeria Police or the FRSC are doing their routine check, all you need to give them is the card. They will insert the card into the machine with them, if it is genuine, it will show; if it is fake, it will show,” he said.

He noted that this innovation would enhance data collection in the sector, adding that it would also help to provide information on “the number of motor vehicles in the country, the number of motor accidents and other related information.”

The Chief Executive Officer, FUSL Insurance Brokers Limited, Mr. Alfred Daudu, explained that the mobile phone text message system would enable an on-the-spot detection of fake and genuine motor insurance certificates.

According to him, when a policeman stops a vehicle on the road, all he needs to do is to type the plate number of the vehicle and send it as a text message to a computer number, which will in return, send an instant reply to disclose all the particulars of the vehicle.

Experts have said that the various efforts by stakeholders to end the era of fake motor insurance certificates will be beneficial, not only to insurers, but also to vehicle owners.

According to them, if a driver has a genuine insurance cover, after an accident, his insurance company should take the liability for his loss, to the tune of N1m, which will cover the injured victims, vehicle repair and even fees for court cases that may arise from the accident.

The Chairman, NIA, Mr. Olusola Ladipo-Ajayi, observed that many fake operators took undue advantage of the motor and marine insurance policies because the law made it compulsory that they should be locally insured.

Most people, he added, patronised fake operators to reduce costs, instead of paying N5,000 to obtain a genuine third party motor insurance certificates.

He also noted that many Nigerians held fake certificates because they were oblivious of the benefits associated with insurance policies, noting that, to many, insurance certificates were “a mere police pass."

 

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