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Finance | Insurance

Ikoyi Building Collapse; a Time to Revisit Compulsory Insurance

Nov 10, 2021   •   by   •   Source: Proshare   •   eye-icon 2089 views

WednesdayNovember 10, 2021 / 1:15 PM / by CSL Research / Header ImageCredit:  Vanguard

 

Ten days ago, a high-rise block of luxury flats underconstruction within the Lagos metropolis collapsed. The reported death toll isforty-four (44), and several other victims with injuries are currently beingtreated. The survivors are unclear of the funding source for their cost oftreatment and recuperation. In addition, Investors who have made a 65% downpayment may have lost their money. Yesterday, media reports stated that many ofthe survivors are requesting that the Lagos state government step in to helpfoot their medical bills, which has raised questions about the project'sinsurance. According to the Nigerian Insurers Association, a circular wasshared with members to confirm if they had the project covered, with nopositive feedback yet.

 

The collapsed building was part of three towers beingbuilt by private developer Fourscore Homes, and the cheapest unit was reportedto have sold for US$1.2 million. Suppose the projectwas not insured, then the project handler, Fourscore Limited, must have ignoredthe provisions of sections 64 and 65 of the Insurance Act 2003, which statesthat existing public buildings and those under construction with more than twofloors must be insured against construction risks caused by negligence. Also,knowing that utmost good faith in disclosing material information towards anyinsurable risk is a condition, a breach of which could vitiate the insurancecontract. Even if there was an insurance contract in place, the very act of notsticking to the approved plan of the building, as widely alleged, has made thecontract unenforceable.

 

Building collapses have been relatively frequent inNigeria, where regulations are poorly enforced and construction materials oftensubstandard. In recent years, especially since the market developmentinitiative took center stage in 2011, there have been consistent efforts atenforcing compulsory insurance contracts. The National Insurance Commission(NAICOM) has continually tried to enforce compulsory insurance compliance inNigeria. Nonetheless, the recent developments suggest a slowdown in thepursuance of the course. For vehicle insurance, often, rather than patronize alegitimate insurance business, motorists patronize illegitimate vendors.

 

Over the years, complaints of delay in claims paymenthave created distrust for the general insurance proposition in Nigeria. NAICOMhas, however, been coming up with policies to ensure seamless insurancedelivery. Recall that in 2019, NAICOM instituted measures to ensure thatplayers in the industry make prompt claims and benefits settlement as part ofits quest to restore the eroding public trust for the business of Insurance inNigeria. The recent recapitalization efforts seek to foster an improvedinsurance delivery in Nigeria. In our view, there are enormous untappedopportunities in the insurance industry, and a combination of favourablepolicies from NAICOM and efficient delivery by players is required to tap intothese opportunities.


Proshare Nigeria Pvt. Ltd.


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