The rains are late in coming this year, but now that they are here, they are relentless and ferocious. Friday, July 16, was particularly bad for motorists in Lagos. The full reports of the extent of damage were not out as at the time of writing, but many roads were submerged. Motorists on the Marina had a raw deal. I have never seen so much flooding on the Marina. The parks were submerged, so were the 100s of vehicles parked there. Not even the SUVs were spared. As I beheld the sorry scenes, having only Motor (Third Party) Insurance began to look very stupid to me.
As you are probably aware, Motor (Third Party) Insurance is the minimum insurance requirement you must have before putting your vehicle on a public road (road here means any road to which members of the public have access) in Nigeria. The Motor Vehicles (Third Party) Insurance Act of 1945, which took effect from 1st April 1950, makes it an offence for anybody to use a motor vehicle on the road without having in place the minimum Motor (Third Party) Insurance to cover the motorist against liabilities arising from third party bodily injuries or death. The Insurance Act of 2003, which reaffirmed the act, extended the cover to take care of liabilities arising from damage to third party property to the tune of One Million Naira. Beyond protecting the policyholder against third party liabilities, the Motor (Third Party) Insurance offers no personal remedies to the policyholder.
But many motorists settle for Motor (Third Party) Insurance because it is cheaper (N5,000 premium for private vehicles and a minimum of N7,500 for commercial vehicles). But with the number of vehicles that were submerged today (July 16, 2021), many motorists will be feeling like they have been penny wise and pound foolish. Many of these vehicles come with sensitive devices and electrical systems. It is going to cost a fortune to fix some of them and without insurance support, the repairs will put a deep gash in the finances of policyholders who opted for Motor (Third Party) Insurance.
In addition to the third party liabilities highlighted above, a typical Comprehensive Motor Insurance Policy covers the loss or damage to insured vehicles as a result of fire, theft, vandalism, accidental damage or collision. This is a standard wording of some insurance companies’ motor policy wordings, but some differ. Some cover flood damage automatically, while some treat it as an extension. In that case policyholders might have to request for the flood damage extension, at extra or no extra premium, before it is added. That is partly why I advise policyholders to go through registered insurance brokers. The average Nigerian policyholder does not read his insurance policy. It is a contract document and all contract documents should be studied and understood. If you have no time for that, get someone (an insurance broker) to do it for you at no extra cost and avoid unnecessary arguments and litigation in future. And such disputes do arise in insurance. Some policyholders have called insurance practitioners unprintable names in the process.
Another extension, which many insurance companies have started incorporating automatically into Comprehensive Motor Policies, is the Strike, Riots and Civil Commission (SRCC) Extension. The claims of some Comprehensive Motor policyholders, whose vehicles were damaged during the SARS Riot were not honoured because of the absence of the SRCC Extension in their policies. Others who had good relationships with their insurance companies were paid ex gratia (money paid to a policyholder out of grace, not that it is deserved going by the terms of the policy). Insurance companies used to grant SRCC Extension free of charge. All that the policyholder or his agent needed to do was request for it if it is not already there in the policy. But in the aftermath of the SARS Riot and the heightened risk in the country, insurance companies now charge additional premiums for it.
Comprehensive Motor Insurance has other benefits the two other motor insurances – Motor (Third Party) Insurance and Third Party, Fire and Theft – do not have. In non-life insurance we have what we call excess. Excess is the portion of each and every claim a policyholder bears. It is represented in both figure and percentage. For instance, if the excess is 10 percent or N50,000, it means that if the policyholder has a claim of N150,000, the insurance company will pay him N100,000. He will bear the excess, which will be N50,000, because it is higher than 10 percent of N150,000, which is N15,000 and insurance companies usually apply the higher figure. The reason for having excess in all non-life insurance policies is to encourage the policyholder to exercise the highest standard of care and treat the asset as if it were not insured. But the good news is that Comprehensive Motor Insurance is the only non-life insurance where you can buy back the excess with payment of additional premium. The implication is that the policyholder will no longer participate in the payment of a claim. In the example above, the insurance company will pay the entire N150,000.
Comprehensive Motor Insurance is also the only motor insurance that makes provision for medical expenses for the policyholder, his driver and other occupants of the vehicle as a result of injuries suffered in an accident involving the vehicle. The amount is usually fixed, but can cover the entire medical expenses when the injuries are minor. But when the injuries are grievous, the provision for medical expenses will not suffice, but 10 percent of something is better than 100 percent of nothing. The ideal insurance to cover such major injuries is personal accident insurance, which can be for an individual or for an identified group. For instance, members of a family or workers of a company. Personal accident insurance goes beyond accidents on the road to homes, offices, factories and other places, depending upon the terms of the policy.
Comprehensive insurance has some other benefits which other types of motor insurance do not offer. While it is more expensive than the others, it makes sense at times like this to go for Comprehensive Motor Insurance.