This is happening even though the Insurance Act of 2003 clearly states that NAICOM should pay out premiums to those affected by these struggling companies.
The law also mentions that NAICOM is responsible for compensating uninsured drivers or those involved in hit-and-run incidents, as well as policyholders whose insurers go bankrupt, leading to the cancellation of their certificates.
Currently, there are thousands of individuals impacted by defunct companies like UNIC Insurance, which lost its license in 2021, and others like Investment and Allied Insurance Company Limited (2011), Spring Life (2010), Express Insurance, SUN Insurance, and Amicable Insurance.
The latest companies to go under are Niger Insurance Plc and Standard Alliance Insurance Plc, both of which had their licenses revoked by NAICOM in June 2022.
According to the law, NAICOM is supposed to help those affected by these liquidations by settling their unpaid and maturity claims, similar to how the Nigeria Deposit Insurance Corporation (NDIC) refunds customers of failed banks.
However, NAICOM has consistently failed to follow its own regulations regarding the payment of claims worth billions of naira, and the exact amount owed remains unknown since it has never been disclosed or settled by the commission.
Section 78 of the Insurance Act of 2003 highlights the importance of security and development funds, which should be used to address issues related to uninsured drivers, insurer insolvency, and the cancellation of insurance company licenses.
Section 78 mandates that the NAICOM provide support for policyholders whose insurer is insolvent or whose operating certificate has been revoked.
The documentation explicitly states: “Section 78 sub-section (1) the security and development fund established under the National Insurance Commission Act 1997 shall (a) be used for the payment of any claim admitted by or allowed against a registered insurer where such claim remains unpaid by reason of insolvency or cancellation of the registration of the insurer.
“Sub-section (b) states that it should be used to compensate innocent individual third parties permanently disabled or killed by uninsured or unidentified drivers.
“Subsection (2) the proportion of compensation to be paid in respect of any claim, shall be determined by the Commission.”
However, our findings indicate that NAICOM misled aggrieved policyholders by failing to address this section of the Insurance Act.
The commission has largely overlooked the public regarding this provision of the Act.
The Nation has discovered that the 53 insurance companies currently listed on the commission’s website hold a total of approximately N40 billion in statutory deposits with the Central Bank of Nigeria (CBN), from which they earn interest.
In the meantime, several industry leaders have criticized the regulator for not adhering to its own regulations, which place the obligation to support policyholders with claims and investments tied up in insolvent insurance companies squarely on its shoulders.
Some of these leaders, who requested to remain anonymous, indicated that Nigerians, particularly policyholders, are largely unaware of Section 78 and the advantages it offers them.
He said: “Yes, there is a pool of statutory deposit that NAICOM collect from insurance companies deposited with the CBN. This is because once you are an existing company; you are mandated to send 10 per cent of your money which is share capital to the CBN.
“For example, some Life Companies have over N1 billion deposited with CBN while some general business have over N2 billion. So, you can imagine the volume of interest that NAICOM is earning and they don’t account to anybody.
“This money is what they ought to use to compensate uninsured’ or hit-and-run drivers and insured whose insurer suffers insolvency that leads to cancellation of certificate by the regulator, NAICOM as stated in Section 78 of the Insurance Act. It is similar to how the NDIC pays customers of defunct banks. Unfortunately, people don’t know and NAICOM is not telling them so that they are aware of such provision.
A leading Industry source further indicated that the use of statutory deposits to settle outstanding claims remains largely unacknowledged, reflecting a reluctance among numerous insurance providers to meet their obligations.
“NAICOM is getting interest on the fund and this has been free money for them for decades.
“I must say that yes, NAICOM has abandoned policyholders of defunct companies which is unfortunate,” he noted.
A reliable source has indicated that the commission is making a significant amount of interest on funds from the CBN without actually using it for its intended purposes.
Since October 22, 2024, questions have been sent to NAICOM's spokesperson, Halil Abba, through text messages, and calls were also attempted, but all were ignored.
The Nation reached out to NAICOM to find out the total statutory fund held by insurance companies with the CBN, who benefits from the interest, and whether NAICOM has ever paid out claims to policyholders of defunct companies like Amicable, UNIC, and Spring Life from that fund.