The Insurance Act Of Nigeria outlines a number of provisions concerning premiums and commissions which constitute the focus of this article. We will be looking more at the topics of :-
– The importance of insurance premiums to insurance contracts.
– General increases in premium charges on motor insurance.
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– The ad-hoc committee on compulsory insurance business.
What are the provisions of the act on the receipt of insurance premiums?
– The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium paid in advance.
– An insurance premium collected by an insurance broker in respect of an insurance business transacted through the insurance broker shall be deemed to be premium paid to the insurer involved in the transaction.
What does the act say on general increases in premium charges on motor insurance, etc?
– No insurer shall either by itself or as a member of an association of insurers make a general increase in the minimum rates of premiums charged or to be charged with respect to any class of insurance business made compulsory by law except with a prior approval of the National Insurance Commission (NAICOM).
– An insurer who makes a general increase otherwise than in compliance with the relevant provisions of this act commits an offence and is liable to a fine of 10 times the amount of premium charged and received by the insurer or 100,000.00 Naira, whichever is greater.
– An insurer who increases rates of premium charged or to be charged with respect to any class of insurance business made compulsory by law otherwise than in compliance with the provisions mentioned in the paragraph above commits an offence and is liable on conviction to either of the following additional penalties:
a). Suspension of its operations in respect of a new insurance business for a period of not less than 6 months or more than 3 years.
b). Cancellation of its certificate of registration, and in addition to either of the foregoing, the insurer shall refund the excess payment to every person making such excess payment or to other persons entitled thereto.
– The penalties referred to above shall be imposed by NAICOM and an insurer who feels aggrieved may appeal to the Minister of Finance under the Insurance Act.
– These provisions shall not apply to non-tariff insurance business, where premiums are charged according to the risk covered by the insurance policy.
What are the provisions of the act regarding the appointment of an adhoc committee on compulsory insurance business?
– The commission may, from time to time, appoint an adhoc committee to deal with matters relating to any class of insurance business made compulsory by law in Nigeria.
– The committee appointed under this provision shall consist of such number of persons and perform such functions as the commission may, from time to time, prescribe.
What are the limitations on the payment of insurance commissions under the act?
– No insurer shall pay by way of commission to an insurance agent, insurance broker or any other intermediary an amount –
a). Exceeding 12.5% of the premium in respect of motor and business.
b). 15% in respect of workmen’s compensation.
c). 20% of the premium in respect of any other subdivision not being one mentioned in (a) & (b) above.
– No alteration in the rates if a commission mentioned above shall be made except with prior approval of NAICOM.
– The rate of commission payable to insurance agent shall not be more than 500% of the rate of commission payable to insurance brokers or as determined by NAICOM , from time to time, on the recommendation of the ad-hoc committee mentioned in this article.
– A person who pays or receives any commission otherwise than in compliance with the provisions of this section commits an offence and will be liable to a fine of 100 thousand Naira plus an additional fine being an amount equal to the excess commission.