Enforcing compulsory building insurance

Enforcing compulsory building insurance

In a move to implement compulsory Occupiers Liability insurance against risks of incessant building collapses across Lagos State, insurance sector operators entered into a partnership with the Lagos State Safety Commission, Ebere Nwoji  examines the partnership and what it means for Lagosians

The Lagos State Government, no doubt is no longer at ease with cases of building collapses in the state and across the country.

As this year’s rainy season is fast approaching, Lagosians seem to be disturbed that cases of collapsed buildings may reoccur.

Insurance Sector operators on the other hand are not comfortable that whereas they are in business to take risks away from the people, cases of building collapses and loss of lives and properties abound without the victims getting any form of compensation, except perhaps the paltry sum often given by government not as right but as privilege.

The insurers are also worried that premiums that would have come to them if the compulsory building insurances were complied with by the masses are not coming due to non-compliance with the law.

Against this backdrop, the State Government has entered into partnership with the umbrella body of insurers, the Nigeria Insurers Association (NIA) to ensure safety of Lagos residents and where the unforeseen happens, to provide compensation for the victims and dependants of unfortunate deceased victims.

The government is riding on the platform of it’s agency for public safety, the Lagos State Safety Commission in the partnership while the NIA is acting on behalf of the insurers.

The Partnership

Irked by these incessant collapse of both occupied buildings and buildings under construction in different parts of the state, the number of lives lost in each case, coupled with the fact that in each case, the victims look up to the state government for succour in the absence of insurance cover which would have given them coverage against unforeseen risks, the state government and the insurers on Monday at the state secretariat came together to fine-tune modalities for the partnership. They also assembled some stakeholders to enlighten them on the occupier liability insurance. The duo said  the partnership would  see them flag off  enlightenment campaign on implementation of the compulsory builders insurance, especially occupiers liability insurance across the state.

Speaking during the sealing of the deal, the Director General NIA, Mrs. Yetunde Ilori expressed her gratitude to the state government for cooperating with the partnership. She described the deal as a long lasting project, promising that the insurers would ensure its sustainability.

She said the insurers were partnering major technological network providers to ensure the workability, adding that with their involvement, every Lagosian would in his or her comfort zone click buttons to buy insurance cover.

According to her, the deal is targeted at taking the popular occupiers liability insurance to another level.

“It is about the safety of all and not about a particular company. Often people say God forbid when you talk about the unforeseen but it happens. Insurance is not to prevent the happening but it is about when it happens, what next? How do you guarantee the continuity of your business? Many companies die because there is no safety consciousness”, she stated.

She stated that Lagos is the first state to seal the partnership, adding that the association would move to other states for the same partnership, noting that the association would also partner with some individuals who have stood as insurance ambassadors for the same purpose.

Purpose of the partnership

The Director General and Chief Executive officer, Lagos State Safety Commission, Lanre Mojuola,  had said that the purpose of the partnership was to harmonies ideas on how to enforce occupiers liability insurance and ensure that it was  accessible to Lagosians, starting with workers in the state.

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He said the state government was no longer comfortable with number of building collapses in the state.

According to him, there are reports that in the past 40 years, the state has recorded about 480 building collapses .

He said the need to curtail this and ensure safety Lagos has inspired the state government to enter into the partnership and to host a stake holders Meeting to enlighten the public on the need for the occupier liability insurance.

He said the government and insurers have met with stakeholders such as school owners, bakeries, restaurants among others and have intimated them about the policy.

He said they want to start with engagement, enlightenment and awareness creation before going into enforcement.

He said with the campaign, the commission would issue compliant certificates to buyers of the occupiers’ liability insurance cover.

Occupiers Liability Insurance

The Occupiers’ liability insurance is one of the five compulsory insurances launched by the National Insurance commission some years back.

The policy among four others which are Third Party Motor Insurance, Group life Insurance, Health care Professional indemnity insurance were made compulsory by the insurance Act 2003but their enforcement has been on a low ebb especially the building and occupiers liability insurance despite their launch in the six geopolitical zones of the country by NAICOM.

Section 65, sub-section 3 of the Insurance Act 2003, requires the owner or occupier of every public building to be insured against liability for loss or damage to property or death or bodily injury caused by collapse, fire, earthquake, storm or flood.

The 2003 insurance Act, defines a public building as one to which members of the public have access to for educational, recreational, medical and commercial purposes. The penalty for non-compliance is a maximum fine of N100, 000 or one-year imprisonment or both according to insurance Act 2003.

Section 64 of insurance Act 2003, stipulates that for insurance of buildings under construction, every owner or contractor of any building under construction with more than two floors must take an insurance policy to cover liability against construction risks caused by his negligence or that of his servants, agents or consultants which may result in death, bodily injury or property damage to workers on site or members of the public.

Among the building collapses recorded in Lagos in recent times, the collapse of 21-storey building in Gerard Road Ikoyi Lagos, in which more than 21 people were declared dead and many injured was the most recent in the series.

Insurers said it spells the need for intensification of efforts by government to implement the enforcement of compulsory builders and building under construction insurance in Nigeria.

According to the insurers, the enforcement has become necessary because such a magnificent building was under construction without insurance cover though the owner claimed it was insured abroad.

Way forward:

The Commissioner for insurance, Mr. Sunday Olorundare Thomas speaking on way forward on enforcement of the various compulsory builders insurance in the country said though no level of claims or provision would bring back dead ones, insurance operators needed to do more on sensitisation, Lagos State government whom he said had been bearing a lot of expenses in compensation of victims when that kind of occurrence happened should also stand up to enforce the compulsory insurances to reduce its burdens in this direction.

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He described Lagos State as Insurance friendly state adding that it had done much in patronising insurance sector through provision of insurance arrangements for its workforce but said the state government should stand up to help in enforcing compulsory insurance especially the insurance of public buildings and buildings under construction.

Analysts’ view

In their comments, industry analysts said enforcement of the building under construction and other insurances on building would go a long way to not only compensate victims of collapsed building also would go a long way to prevent the building collapses.

According to the analysts, it is obvious that the cause of building collapses is mainly the use of defective, substandard building materials as well as failure to adhere to recommendation of building experts.

The analysts said if building under construction insurance was enforced it would help to compel builders to adhere to use of the right quality building material in building.

According to them, this is because; no insurer would like to sit on a keg of gunpowder in terms of providing cover for any building which construction quality they cannot ascertain.

They said as such if the policy was enforced, insurers, through their assessment of buildings they insure in collaboration with estate managers, quantity surveyors and building contractors and architects would work together to ensure that any house to be covered by insurance policy was built with the right specification by the building experts.

They said this way builders who must get insurance policy cover as one of the requirements before commencing building would ensure that the right standard specification was maintained in the construction process otherwise no insurance company would want to accept the liability of covering such building.

They said this would drastically reduce frequent cases of collapsed building in the country often caused by use of substandard building materials and wrong specifications.

Experts’ View

Construction experts namely Professor Awoyera Alfa, A Adetoye and L L Akinwumi all from the Department of Civil Engineering, Covenant University Ota in their recent work on building collapse in Nigeria causes and effects said building collapse in Nigeria in the last few decades has become a growing concern for investors and the government alike.

According to them, many of the documented cases of building collapse in Nigeria are due to the use of defective or substandard building materials, no requisite technical knowledge, non- adherence to building codes and standards, the use of non-professionals and the high level of corruption which has ravaged every sphere of the construction industry including government and private parastatals.

According to them, in addition to the established causes of the collapse of structures, empirical data from developed countries of the world has shown that many of the recorded cases in this climes are due to the fact that the current codes of practice do not make provisions for unexpected loads and an unexpected failure of a single member may lead to an all-round collapse of the entire structure.

This being the case, the role of insurance as a risk mitigating factor in addressing losing emanating from building collapses as well as in encouraging if not compelling building owners to adhere to the right standard cannot be overemphasised.

Building collapses in Lagos not only occur in building under construction. Also occupied buildings also collapse and portends more danger to lives and properties.

Cases of Building Collapse

For instance, in March 2019, the same Lagos Island witnessed the collapse of a three-storey building in the Ita-Faji area of Lagos Island Local Government, in which many people including school children lost their lives. The building was occupied by a school and when it collapsed, many school children were killed including the proprietress, thus reinforcing the need for enforcement of the occupier liability insurance.

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Within the same period, in Apo Mechanic village Abuja, a story building collapsed trapping six people and there was also another reported case in Ibadan, within the same period.

This is in addition to fire outbreaks in markets all of which supposed to be covered under the compulsory insurance of public building which occupiers liability insurance suppose to take care of.

Late last year, precisely in November, the popular Nkwo Ogbe Market in Ihiala Local Government Area of Anambra State was gutted by fire destroying goods worth of millions of Naira.

The owners of the shops gutted by the fire lamented that the then state governor, Willie Obiano came to the venue but failed to say anything tangible in terms of rescue and intervention effort.

Asked if they insured their shops, the fire victims said no. This confirms what the insurance commissioner said about huge task of awareness and sensitisation of the people on the value of insurance in addition to government’s enforcement need and effort.

When THISDAY last week contacted one of the victims of the Nkwo Ogbe market on the situation, she said everything had remained as they were after the fire, adding that there was no financial aid from Anambra State government; rather, the state government was threatening to throw the traders out and build a standard market for those who have money to rent or buy.

Also analysts said the review of the insurance Act 2003 is overdue adding that N100,00 and N250,000 penalty for non compliance to the compulsory builders insurance is long overdue for upward review.

They said all these would help to encourage builders to maintain the right standard in their projects and prevent building collapses.

Efforts by NAICOM

NAICOM on its part had been making efforts to see that the compulsory building insurance is enforced but these efforts have not yielded the desired results. In the year 2010, the commission had launched the compulsory insurances in the six geopolitical zones of the country.

In October 2017, it inaugurated a technical committee that would drive the enforcement of public building insurance in Nigeria.

The committee was made up of representatives of NAICOM, the Federal Fire Service (FFS), representatives of states fire service from the six geo-political zones and the Nigeria Insurers Association (NIA). Since then nothing has been heard about the work or achievement of the committee.

At the state level, Lagos State and Imo state governments had years back after NAICOM’s geopolitical zone’s campaign followed suit by enacting their own state compulsory building insurance. But after the launch, implementation became problem.

NAICOM had at a media retreat explained that the reason was because the 2003 insurance Act did not empower anybody for the enforcement.

Industry analysts viewed that with the current collaboration between the Lagos State Safety Commission on behalf of the state government and insurers coupled with the initial partnership with over 150 insurance brokers who serve as intermediaries and 20 insurance underwriters for the purpose of providing end to end risk management services to its workforce, the state government would leverage on this partnership and implement the enforcement of all compulsory builders insurances including Occupiers liability insurance.


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