By : Tope Adaramola
One of the most popular insurance policies in Nigeria is the Third Party Motor Insurance. The reason is obvious: it is compulsory for all motorist plying the road and no one would like to face the wrath of the Police or any other security agency saddled with the responsibilities of maintaining road sanity by infringing the law. In fact many refer to the policy as “Police make I pass”, hence its a must have, regardless of whether you like to insure or not.
For about 19 years the rate had remained N5,000:00, despite the vagaries of the economy, with liability to third party in the event of damage to property fixed at maximum of N1million.
In actual sense, many do not understand why the policy is called 3rd Party. What it means is that the insured or owner of the vehicle is the first party, the insurance company that insured it is the second party, while the person whose car or property was demaged by the insured is the third party. The implication is that if your car damages another person’s car and you have a policy in place, your insurer is liable to compensate the person who was affected up to the sum of N1million as compensation. The only slight exception is when life is involved in the event of death or physical damage to the victim for which more money or compensation may be paid. The reason is that no monetary value could be placed on human life, hence is is often a subject of negotiation and consultations reached between both parties. The beauty is that many motorists are taking advantage of the insurance policy to reduce their risks on the road.
With the new rate, as communicated by the National Insurance Commission through a circular, all motorists would from January 1, 2023 be expected to pay N15,000:00 as premium for Third Party policies, but with corresponding liability to third party now fixed at a whopping N3million.
On the consumer side, there may be uneasy calm, based on what appears an astronomical increase in the rates, but they must not lose sight of the fact that compensation for their victims has also increased significantly to N3million. This will give more comfort in the event of an accident and also make our roads safer by reducing anxiety and usual fisticuffs we see on the road as a result of issues relating to getting compensation to those who were at the receiving ends of motor accidents.
On the side of the insurance companies, there would be better solvency, as they would have more money to meet their claims payment obligations and expand their businesses with consequential benefits on more employment opportunities in the industry and enhanced contributions of the industry to the nation’s Gross Domestic Product (GDP), making it a win-win-game at the end of the day.
There is no doubt that people are naturally wired to be reactive to change, and understandably so at a time of parlous economy as this, but the fact is that the review would benefit all on the long run and it now remains for the insured to acquaint themselves more than ever before with intricacies of insurance operation to enable them take advantage of the new regime of compensation when a loss occurs on their Third party insurance. This they could do by engaging Registered Insurance Brokers who are professional intermediaries in the insurance value chain, positioned to explain the nitty gritty of insurance policies, including ne Third Party policies in question, as well as help facilitate receipt of compensation when a loss occurs.
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