MOTOR INSURANCE POLICY - ILLUSION OR NECESSITY IN OUR EVERY DAY LIFE

It is an everyday occurrence to see matured people arguing or fighting each other on the road due to involvement of their vehicles in motor accident. There are even stories of vehicle owners been killed or knocked down by another vehicle in an attempt to stop or accost a negligent third party who impaired their motor vehicles. There are incidences of vehicle owners packing their cars at designated places only to return and found the car damaged by an unknown vehicle or vandalized or even stolen by unknown persons. Burnt remains of vehicles which caught fire while been driven could be seen on the road on regular basis before been evacuated to create room for free flow of traffic by concern government agencies. Some vehicle owners have been made to go through some difficult situation that affected them financially and emotionally because their vehicles damaged a third party property or injured/killed a third party. While insurance cover cannot be bought to cover emotional risk, it can be bought to cover financial consequence arising out of having a vehicle on the road.

What is motor insurance?

Motor insurance is an insurance cover given to a motor vehicle owner by an insurance company for the protection of vehicles that are expected to be on public road. It gives cover against damage to the motor vehicle and liabilities in respect of bodily injury to third parties and damage to third party properties.

In order to know the benefit and importance of motor insurance, we have to go down memory lane to know what brought about the insurance of motor vehicles that plied the roads.

In the early days of vehicle production, only wealthy individuals could afford them and these people were in the position to meet financially any liability arising through the usage of the vehicle. However, mass production of vehicles made the prices to drop making a large percentage of the populace to be able to afford vehicles. At the same time, the speed and performance of the vehicles increased though there was no attendant rise or upgrading in road construction. This situation among others gave rise to an increase in the number of people injured or killed on the roads by motor vehicles drivers/users, many of whom could not compensate the victims of their negligence. In these circumstances, there was a great pressure on the governments to intervene and many of these authorities responded positively by making compulsory Third Party insurance in one form or another.

The first country to introduce a compulsory insurance law was Denmark in 1918 followed by Norway in 1927. However, the United Kingdom actually revolutionized compulsory motor insurance with the passing of the Road Traffic acts 1930 – 34 which required insurance for an unlimited amount in respect of injuries to third parties. The British Acts have been the basis of similar legislation in many countries including Nigeria.

Compulsory Requirement

The principal legislation on motor insurance in Nigeria is the Motor Vehicles (Third Party Insurance) Act 1945 which is on the basis as the United Kingdom’s Road Traffic Acts 1930. Section 3 of this Act stipulates that ‘No person shall use or cause or permit any person to use a motor vehicle unless there is in force in relation to the use of the motor vehicle by such person or such other person as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the provisions of this Act’.

The Act makes it compulsory for cover to be arranged for personal injuries to third parties by insurers approved by the government. The policy must cover liability for death of or injury to any person without limitation of amount. Nevertheless, it does not cover accidents sustained by individuals in the course of their employment or accidents to passengers not carried or hire or reward or members of the insured’s household carried in a motor car unless such person is being carried by reason of or in pursuance of a contract of employment.

The main reason for the introduction of compulsory insurance against death or injuries to third parties is to ensure that money is available to compensate the innocent victims injured or killed in road accidents whatever may be the financial position of the negligent motorist.

Types of Motor Insurance Policy

For the various types of vehicles, there are three major kinds of motor insurance policy – one of which should be issued depending on the requirement of the insured. These are:-

Comprehensive Motor Insurance Policy:

This is generally the widest type of cover available for motor vehicles. This does not however imply that cover is provided against every conceivable contingent of whatever nature. This insurance protect against:

(i)      Loss of or damage to the insured vehicle and/or its accessories while thereon.

(a)    By accidental collision or overturning consequent upon mechanical breakdown or wear and tear.

(b)   By fire, external explosion, self-ignition or lightning or burglary, house breaking or theft.

(c)   While in transit (including the process of loading or offloading incidental to such transit) by road, rail, inland waterways, lifts or elevators.

(d)   By malicious act.

(ii)   The insured’s legal liability for death of or bodily injury to or damage to property of third parties arising out of the usage of the insured vehicle.

(iii)    Medical expenses of the insured, his driver or any occupant of the insured vehicle at the time of the accident. This cover is in respect of private cars only and the present limit is really very low.

(iv)     Solicitors fees for the legal representation of the insured or his driver at any judicial proceeding arising from any accident which may give rise to a claim under the policy and any other expenses of the insured authorized by the insurer, preferably in writing. This included representation at any inquest or fatal injury inquiry.

 Third Party, Fire and Theft Insurance Policy:

The policy covers:-

(i)       Loss of or damage to the insured vehicle and/or accessories while thereon caused by fire, external explosion, self-ignition or lightning, burglary, housebreaking or theft.

(ii)     Insured’s legal liability to third parties in respect of any damages to the property of such third parties and for any injury or death to third parties from the use of the insured vehicle.

(iii)   Solicitor’s fees for the legal representation of the insured or his driver at any judicial proceeding arising from an accident which may give rise to a claim under the policy and other expenses of the insured authorized by the insurer preferably in writing.

Third Party Only Insurance Policy:

(i)      Insured’s legal liability to third parties in respect of any damages to the property of such third parties and for any injury or death to third parties from the use of the insured vehicle. Section 68 of the Insurance Act 2003 has made it compulsory for every vehicle owner to have cover for a minimum sum of N1m against Third Party Property damage.

(ii)      Solicitor’s fees for the legal representation of the insured or his driver at any judicial proceeding arising from an accident which may give rise to a claim under the policy and other expenses of the insured authorized by the insurer preferably in writing.

In essence, a typical motor insurance policy is of three parts, viz:

 (1.)    Cover against liability for third party death and/or injuries and medical expenses which are compulsory.

(2.)     Cover against liability for property damage which is compulsory (minimum of N1m).

(3.)     Cover against any form of damage to the vehicle which is optional.

Motor Vehicle Classification

For insurance purposes, motor vehicle is categorized into three broad categories:

1.      Private cars

2.      Commercial vehicles – subdivided into six further categories

3.       Motorcycles

Private Cars

This is regarded as a vehicle being used by the policy holder for his social, domestic, pleasure and business purposes only. The vehicle is not to be used for hire, reward, racing, pace-making, reliability trial, speed-testing or any purposes in connection with motor trade. In addition, the following dual purpose cars may be rated under the private cars tariff provided there is no use for hire or reward:

(a)   Cars of private type fitted with a body alterable or an alternative use;

(b)  Cars with a dual purpose body;

(c)   Cars fitted with a passenger body, altered for the purpose of carrying goods or samples; and

(d)  Station wagons, utilities, mini buses and the like.

Commercial Vehicle

These are vehicles not provided for under the Private Car or Motorcycle Tariff. It is sub-divided as    follows:-

(i)        Motor trade – internal risks or road risk;

(ii)       Goods carrying vehicles - own goods;

(iii)      Goods carrying vehicles – general cartage;

(iv)      Hire cars;

(v)       Hire cars – hirer driving;

(vi)      Buses;

(vii)     Special types;

Motor Trade

This is for motor traders – manufacturers, sellers, or repairers. There are two types of policy viz:

(a)        Internal Risks

      This is divided into two sections covering:

(i)         Damage or loss to any motor vehicle (including its accessories whilst thereon), property of the insured, any member of the insured family or household caused by accidental, external and visible means and occurring in or on the specified premises. However, the insurer will not be liable for loss due to depreciation, wear and tear, mechanical or electrical breakdowns, damage to tyres by application of breaks or by punctures, cuts or bursts or loss of use. The insurer’s liability is subject to a fixed limit for any one accident or occurrence.

(ii)        Liability to third parties in respect of all sums including claimant’s costs and expenses which the insured shall become legal liable to pay for ‘Accidental death or bodily injury to any person other than a person in the insured’s service or a member of the insured’s family or household – the insurer’s liability is not limited for any one accident or occurrence.

The accidental damage aspect is limited to:

(i)          Any motor vehicle (including its accessories while thereon) held in trust by or in the custody or control of the insured.

(ii)        Property not belonging to or held in trust by or in the custody or control of the insured, occurring in or about the premises through the negligence of the insured or any person in the service of or acting on behalf of the insured or by or through any defect in the premises or in the ways, works, machinery or plant therein. The insurer’s liability is limited to a fixed amount or any one accident or occurrence. In addition, the insurer will pay all costs and expenses incurred with its written consent.

However, the policy is subject to the following exceptions:

(i)        Damage to any vehicle or its accessories caused by weather conditions.

(ii)       Death, injury or damage resulting from the driving elsewhere than in or the premises of any vehicle belonging to the insured or any person in the service of or acting on behalf of the insured.

(iii)      Death, injury or damage caused by or through or in connection with the use by the insured of power-driven cranes, elevators, lifts or hoists other than car hoists having a lift not exceeding a particular height.

(iv)      Any defective workmanship.

(v)       Death, injury or damage caused by or through any demolition of or structural alteration or addition to the premises or by or through the installation of any equipment.

(vi)      Damage to property sustained while it is being worked upon and directly resulting from such work.

(vii)     Damage to property caused directly or indirectly by fire or explosion.

(viii)    Any consequence burglary, housebreaking or theft or any attempt thereat.

(ix)      Any liability which attaches by virtue of an agreement but which would not have attached in the absence of such an agreement.

 (b)        Road Risks

This is in respect of accident, loss or damage to the vehicle (belonging to the insured or under  his care, custody or control) while on the road or temporarily garaged during the course of a journey. However, the incident must occur elsewhere than in or on any premises owned by or in occupation of the insured.

The policy is divided into three sections covering:

(1)     Loss or damage of motor vehicles and or its accessories whilst thereon due to accidental  collision/overturning consequent upon mechanical breakdown or wear and tear, or fire, external explosion, self-ignition or lighting or burglary, housebreaking or theft. The insurer’s liability is subject to a fixed amount for any accident/occurrence.

(2)     Liability to third parties in respect of all sums including claimant’s costs and expenses which the insured shall become legal liable to pay for:

(i)      Death of or bodily injury to any person caused by or arising out of the use (including the loading and/or unloading of the motor vehicle). Insurer’s liability is unlimited for any one accident or occurrence.

(ii)     Damage to property caused by the use (including the loading and/or unloading of the motor vehicle). Insurer’s liability is limited to a fixed sum anyone accident or occurrence. In addition, the insurer will pay all costs and expenses incurred with its written consent.

(iii)   Loss or damage to, as well as liability arising from any vehicle insured by the policy or the purpose of being towed. However, the insurer will not be liable in respect of damage to property conveyed by the towed vehicle. Likewise, insurer will not be responsible in respect of accident, loss, damage and/or liability caused while the motor vehicle insured is towing a greater number of vehicles than is permitted by law.

Goods-Carrying Vehicles – Own Goods

These are vehicles used purely for the carriage of goods or for in connection with any trade or business of the insured but excluding the carriage of goods for hires or reward. However, it needs stating that:

(a)   Carriage of passengers while using the vehicle in connection with the insured’s business is permitted.

(b)  Towing of any one disabled mechanically propelled vehicle is permitted though it must not be done for hire or reward.

(c)   Use for social, domestic and pleasure purposes by the insured is permitted.

(d)  Agricultural and forestry vehicles are not included under this class (except those used solely for haulage purposes which attract 50 per cent of the normal comprehensive premium).

Goods-Carrying Vehicles – General Cartage

These are vehicles used for the carriage of goods for hire or reward including general cartage vehicles licensed for the carriage of passenger for hire or reward.

Hire Cars/Hirer Driving

These are motor vehicles having a seating capacity for not more than six passengers (excluding the driver) and carrying passengers for hire or reward under a contract expressed or implied, for the use of the vehicle as a whole.

The policy/certificate issued for hire cars permits:

(a)   Using the cars for the carriage of passengers or goods in connection with the policy holder’s business.

(b)  Usage for social, domestic and pleasure purposes.

(c)   Towing (other than for reward) for any one disabled mechanically-propelled vehicle.

(d)  For hirer-driven cars, cover for any other person who is driving on the policy holder’s order or with his permission.

(e)  For hirer-driven cars used for the carriage of passengers for hire or reward by any person to whom the vehicle is hired.

(f)    Automatic cover for legal liability to passengers.

 Buses

 These are motor vehicles having seating capacity for at least seven passengers excluding the driver. This class will include:

(i)     Motor vehicles used for carrying passengers for hire or reward including those primarily designed for this purpose; and

(ii)   Private omnibus, that is, those used by hotels, schools, etc. or the carriage of employees only.

Special Types

These are motor vehicles that:

(a)   Cannot be classified under sub-divisions 2 - 6 previously discussed; and

(b)  Designed primarily by the manufacturers for specific purposes, e.g; forklift, trucks, fire brigade vehicles, bulldozers, ambulance, etc.      

Motor Cycle

For insurance purposes, the following will be regarded as motorcycles:

(a)   Any mechanically self-propelled two-wheeled vehicle.

(b)  Any mechanically assisted vehicle with an engine capacity not exceeding 100cc and designed to be propelled by pedals.

(c)   Any three-wheeled van not exceeding 175cc with maximum carrying capacity of 6 cwts.

(d)  Side cars (attached to protect the rider and passenger) is regarded part of the motorcycle.

Motorcycles are divided into two, viz:

(i)     Private cycles used purely for social, domestic and pleasure purposes as well as in connection with insured’s business.

(ii)    Commercial cycles including motorcycles and three-wheeled vans used for social, domestic and pleasure purposes and for the insured’s business including carriage of goods and/or passengers for hire or reward.

Premium Computation

Premium is the price one party, known as the insured or policyholder pays for the risk he is insuring with the insurance company. The payment of the premium will bind the insurance company to pay the insured for a loss he may suffer during the period of the insurance contract.

The gross premiums are based on fixed percentage on the replacement value of the motor vehicles for Comprehensive Insurance Cover and Third Party, Fire and Theft Insurance policies while it is flat rate for Third Party Insurance Cover.

The ECOWAS Brown Card System

The ECOWAS Brown Card System was introduced in West Africa in 1982. The principal objective of the scheme is to guarantee for road accident victims, fair and prompt compensation for death, injuries or damages caused by visiting non-resident motorists from other ECOWAS member countries. It is similar to the Green Card Scheme in Europe and Yellow Card Scheme in North Africa and the Middle East. Currently, the ECOWAS Brown Card System is administered by a Network of Bureau in sixteen countries namely: Benin, Burkina Faso, Cape Verde, Cote D’ivorie, Gambia, Ghana, Guinea Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo.

These national Bureau offices were set up by each member country and are responsible for controlling the issuance of a Brown Card in their own countries and to investigate and handle claims which arise from accident involving visiting motorist.

ECOWAS Brown Card is an extension of Motor Insurance policy covering a motorist whilst driving his vehicle abroad. Motor Insurance policy contains “geographical limit” proviso, which permits the usage of the insured vehicle only within the covered geographical area, which is within the country the insurance company is registered and operates e.g. Nigeria. Consequently, any accident that occurs outside the geographical area is not covered by the policy.

The Brown Card is issued and valid on two conditions:

(i)        That the vehicle for which it is required is insured by the same insurer, at least, against third party motor insurance risks or the minimum motor vehicle insurance requirement of the country in which the vehicle is being used.

(ii)       That the original third party cover remains in force during the validity of the card. However, where the visiting motorist cannot get back to his country of usual residence before the original third party cover or brown card expires, he should not hesitate to contact the national bureau of the country visited.

The maximum duration of ECOWAS Brown Card cover is three (3) months after which a new card would be issued depending on the period the motorist intends to stay in the foreign country.

The essence of this article is to raise awareness on motor insurance policy, its benefits and importance to our everyday life and bring to our consciousness that it is against the law to drive a car on public road without at least a Third Party Insurance policy cover on such vehicle.

The premium payable on motor vehicles compare to the compensation one get after occurrence of an accident also justify the need for an insurance cover.

While some people have had some of their motor claims not paid by some insurance companies in the past, such a claim if genuine cannot be denied or remain unpaid again with the Complain Channel put in place by National Insurance Commission (NAICOM), there are now channels to lodge complains against any Insurance Companies which defaulted in performing their Statutory responsibilities by honoring any genuine claims. Such complain can be channel to Nigerian Insurers Association (NIA) who will get involved in the case in order to make sure that any policyholder who as a genuine claim is adequately compensated by the insurance company.

Do you have a car which is not insured, please I will like to know why and if you have just Third Party Insurance cover on your car, does that mean you don’t value your investment on the car. Have you consider “if” the car is stolen, involved in an accident that renders the car not repairable, does that mean you have lost your investment on the car or you are involved in an accident and you are the negligent driver and the Third Party Insurance cover you have on your car pays for the Third Party vehicle, what will happen to your own vehicle, you will look for money to repair it or divert money kept somewhere for another purpose to fix the car what will now happen to the original reason you saved the money.

It is now at your peril, if you drive in Lagos State without any insurance cover on your car. Lagos State Government has installed Automatic Number Plate Recognition, a specialised CCTV system which captures the registration of your vehicle and run it through their Database, if the result came out that you don’t have a running insurance cover on your car, the fine is N20,000.00 with your BILL delivered to your registered address.

Should you want to confirm if your insurance policy is genuine, please visit:- www.askniid.org. I am just a chat away if you need advice on the insurance of your motor vehicle or you have issues concerning you claims.               

Thank you for reading.