In the bustling streets of Lagos, a seemingly mundane collision underscored a widespread misunderstanding about third-party motor insurance among Nigerian motorists.
On August 16th, James Ehis was navigating the streets in his Toyota Highlander when a brake malfunction caused him to veer off his path, colliding with a 2020 Lexus RX parked near a barbershop on Oyemeku Street.
The impact was severe, rendering both vehicles considerably damaged.
Ehis, recognizing the worth of the Lexus, felt a rush of anxiety.
Despite holding a valid third-party insurance certificate, the thought of repairing the Lexus overwhelmed him. The repair estimate?
A staggering N380,000 – nearly two months’ worth of his earnings, upon which his family depended.
But hope arrived in the form of Ehis’s friend, Kunle Adeola. Reminding Ehis of his active third-party motor insurance, Adeola explained its coverage.
This policy, updated by the National Insurance Commission earlier that year, saw premiums rise from N5,000 to N15,000, but also increased coverage to N3 million. While many, like Ehis, viewed motor insurance as just a means to avoid legal complications, they were unaware of its actual protective power.
Thanks to Adeola’s guidance and persistence, Ehis approached his insurance company. Armed with documentation, including evidence of the accident and a police report, Ehis’s claim was swiftly approved, covering the complete repair cost for the Lexus.
Bisola Kolawole, the Lexus owner, shared his astonishment: “I assumed Ehis was stalling when he mentioned his insurance. Yet, within three weeks, my car was restored, and it didn’t cost me a thing.”
The experience of Ehis and Kolawole is a testament to the unsung value of third-party motor insurance. It not only spares motorists from hefty out-of-pocket expenses but also secures their financial well-being after unforeseen accidents.
However, despite its evident benefits, misconceptions persist.
A significant number of Nigerian drivers remain unaware of the robust shield that a third-party motor insurance policy offers.
This gap in knowledge underscores the need for enhanced awareness and education regarding motor insurance in Nigeria.
The Underutilized Shield
Many Nigerian motorists, despite being insured, bear the costs of accident-related repairs due to a prevalent lack of understanding and appreciation for third-party motor insurance.
This gap in awareness often leads them to self-finance these expenses, even when unnecessary.
Investigations by Nairametrics highlighted that, particularly among commercial drivers, insurance coverage remains seldom invoked.
Such drivers often find themselves paying out of pocket, or in dire circumstances, resorting to begging or confrontations.
Adekunle Ariyo, an Agege-based commercial bus driver, encapsulated this sentiment, explaining that many view the insurance certificate as merely a safeguard against law enforcement rather than a financial safety net.
In echoing Ariyo’s sentiment, Peter Udom, a minibus driver, confessed, “I’ve always renewed my insurance due to recommendations and to appease Vehicle Inspection Officers. Yet, I’ve never claimed. If I incur damages, it comes from my pocket”.
Chinoso Johnathan, a tricycle operator from Ogba, during a rush hour incident, chose personal expense over insurance. “I have third-party insurance, but I can’t be bothered with the long process. I’ve heard about delays in compensation, and frankly, with pressing responsibilities like my children’s school fees, I don’t have time for a mere N5,000 claim,” he expressed.
Dele Johnson, a civil servant and vehicle owner, pinpointed the crux of the issue; “The overarching challenge is the patience required for the claim process to materialize.”
The pervasive lack of understanding regarding third-party motor insurance has become a pressing issue in Nigeria. It’s causing motorists to incur unwarranted out-of-pocket expenses after accidents and leaves them susceptible to fraudulent schemes by dubious insurance entities.
Johnson emphasized, “It’s crucial for drivers to be cognizant of their rights and understand the proper channels for claims should they find themselves in a collision.”
Former Nigerian Insurers Association Chairman, Mr. Ganiyu Musa, stressed the critical importance of third-party motor insurance through his personal narrative. Following a collision with a delivery van, he recounted how the van driver, despite having insurance, was ready to prostrate in apology.
Despite having valid third-party motor insurance, the van driver was initially unaware of its benefits. Musa guided him, emphasizing the importance of such policies.
“Third-party motor insurance is a legal requirement in Nigeria. In my case, the van driver’s insurance covered my car’s repair costs, saving him from a hefty out-of-pocket expense.”
“This incident underscores the value of third-party motor insurance. While it’s a legal requirement, its role as a financial shield in accidents is crucial. Paying for this insurance ensures peace of mind, ensuring motorists aren’t burdened financially,” Musa highlighted.
The overarching sentiment is clear: third-party motor insurance isn’t just a legal formality but an essential protective layer. The challenge remains bridging the information gap and dispelling myths around it.
Demystifying Third-Party Motor Insurance in Nigeria
In a detailed chat with Nairametrics, Mr. Mayowa Adeduro, the Managing Director of Tangerine General Insurance Plc, delved deep into the mechanics of third-party motor insurance.
“Essentially, third-party motor insurance serves as a shield, safeguarding drivers against financial liabilities stemming from accidents causing damage or injury to third parties. In this configuration, the insured driver is the ‘first party’, the insurer stands as the ‘second party’, and the affected third party can be anyone from a pedestrian to a property owner,” Adeduro illuminated.
However, he was quick to highlight its scope. “Although it’s a foundational form of insurance, recognized and mandated in many jurisdictions, third-party insurance isn’t all-encompassing. It won’t shoulder costs related to the insured driver’s car damage or their medical expenses. Its domain remains focused on third-party property damage and bodily injury within the stipulated policy limits.”
On addressing the glaring knowledge gap surrounding insurance in Nigeria, Adeduro acknowledged NAICOM’s initiative in highlighting the importance of third-party insurance, coupled with the premium adjustment. He also introduced a broader perspective.
“In light of present-day societal challenges, from kidnapping to terrorism, risk management – where insurance plays a pivotal role – is more crucial than ever. This current landscape makes the integration of insurance education not just desirable but necessary,” Adeduro opined.
He advocated for a top-down educational approach.
“Introducing insurance literacy from primary through tertiary education will cultivate a generation more aware and appreciative of risk management.
When you understand that a mere N15,000 premium can protect against damages worth N3 million, the value proposition becomes clear.
It’s imperative that insurance, as an integral sub-sector of risk management, be ingrained in our educational fabric,” he emphasized.
Talk to your registered Insurance Brokers now.