By Obioma Ezenwobodo

THIRD PARTY MOTOR INSURANCE: NEED FOR CERTAINTY OF TIME WITHIN WHICH TO HONOUR CLAIMS AND OTHER REFORMS

INTRODUCTION

With the recent announcement by the Inspector General of Police (IGP) Kayode Egbetokun on the Force preparedness to commence enforcement of the third party insurance policy on motorist beginning on 1st of February 2025, the third party insurance policy has once again under the searchlight.

As far back as 1945, before Nigeria independence, the Motor Vehicles (Third Party Insurance) Act was enacted to make far reaching provisions against third party risks arising out of the use of motor vehicles in Nigeria. By virtue of section 3 of the Act, it is a criminal offence for a person to use, cause or permit any other person to use a motor vehicle without a policy of insurance in respect of third party risks. A defaulter is liable on conviction to fine of N400; or to imprisonment for one year or both and a disqualification from holding or obtaining a driving licence. As a corollary, the legislators in 2004 enacted the Insurance Act to regulate insurance businesses in Nigeria. Section 68 of the Insurance Act provides for insurance of third party motor vehicle to cover liability of not less than N1 million and makes defaulters liable on conviction to a fine of N250, 000 or imprisonment for one year or both. In other words, two legislations provide for third party motor insurance in Nigeria.

On the enforcement of the third party motor insurance policy, section 17 (1) of the Motor Vehicles (Third Party Insurance) Act makes the Nigerian Police the principal enforcement agency to enforce the provisions of the Act. By way of support, section 17 (2) of the Act makes a leeway for a police officer or any person having reasonable grounds for requiring the policy certificate to enforce the provisions of the Act. By virtue of section 7(2) of the Act, it is safe to say that officers of the Federal Road Safety Commission are captured by this provision as they have reasonable grounds to request for the policy certificate. This view is supported by section 10 (4) (i) of the Federal Road Safety Commission (Establishment) Act, 2007 which provides thus:

10 (4)“In the exercise of the functions conferred by this section, members of the Corps shall have power to arrest and prosecute person responsible suspected of having committed any traffic offence including the following offences and serve such person with court processes or notice of offence sheet-

(i) being on a road the driver thereof, being in possession of a valid driving licence or any other licence or permit required by law.”

Concerning the Insurance Act, section 86 of the Act vest the National Insurance Commission the responsibility to administer and enforce the provisions of the Act.

On jurisdiction of Court, the Motor Vehicles (Third Party Insurance) Act fails to vest on any court the jurisdiction to adjudicate on offences provided in the Motor Vehicle (Third Party Insurance) Act. On the other hand, section 80 of the Insurance Act vest the Federal High Court with jurisdiction to try offences under the Insurance Act.

CHALLENGES TO THE POLICY REGIME

The implication of the above provisions is that Third party motor insurance covers the policy holder’s liabilities arising from damage caused to the third party’s vehicle or property up to N1m. In other words, where a policy holder is liable for damage to motor vehicle of another person (third party), the policy takes over the liability in favour of the third party whose car was damaged. The policy is the minimum mandatory requirement every vehicle owner in Nigeria must have to ply Nigerian roads.

Overtime, the insurance policy has been bogged down by economic downturn that makes it unaffordable for some Nigerians, ignorance on the part of motorists on huge benefits of the policy brought about by poor sensitization by stakeholders and by lack of legislative framework to stipulate a timeframe in which the claims have to be redeemed by the insurance company.

In the FCT and many other States, the annual renewal of vehicle particulars automatically comes with the third party insurance policy offered by different insurance companies. Sadly, while many motorists are unaware that the policy that comes with the annual vehicle particulars renewal is a protection that can absolve them from liabilities occasioned by accident in which a third party’s vehicle was damaged, others see the policy as a mere paper (certificate) to avoid police harassment otherwise tagged as ‘police let me pass paper’. As this ignorance by pervades and the economic essence of the legislations erodes, some insurance companies seem not bothered as they appear to be direct beneficiaries of the situation as policy holders that should be making claims from them are not doing so.

WAY OUT

As the Nigerian Police is activating its powers under section 17 of the Motor Vehicles (Third Party Insurance) Act 1945 to enforce the policy on Nigerian roads, apart from the need to commence extensive public enlightenment on the huge benefits of the policy to motorists, there is an urgent need for a legislative intervention by way of amendment of both extant legislation to introduce a simplified and fast method/mode of redeeming claims as such is not captured by the extant legislations.

In a fast paced business world where time is of essence, there should be a time frame within which an insurance company must redeem a claim upon an application by a policy holder. This lack of time frame in the Act might be exploited to delay or frustrate a claim upon an application by a motorist or a third party.

Further, the N1million liability benchmark was introduced when the policy cost just N5, 000 and there has been no review after the cost was raised to N15, 000. Considering the high cost of spare parts brought about by inflation, it is advisable for the N1million liability benchmark to be substantially increased to reflect the current realities.

CONCLUSION

The economic benefit of a legislative intervention prescribing the time frame within which a claim shall be redeemed upon an application by a motorist or a third party is huge as it will restore confidence and trust on the insurance industry. Prospective policy holders will be spurred to take up the policy as they will be certain of the time within which their claims will be redeemed against liability for a third party motor damage rather than to be left at the mercy or discretion of the insurance companies. This innovation will invariably yield more economic dividends as more people will take up the policy while the insurance industry and the economy benefit from same.

• Ezenwobodo, Managing Partner at Resolution Attorneys, Abuja and Executive Director of Policy and Legislative Advocacy Network (PLAN), can be reached at obiomadan@gmail.com

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