Employers With Better Life Insurance Free to Continue [analysis]

SECTION 9 (3) of the Pension Reform Act 2004 requires every employer, to which the Act applies, to maintain Life Insurance Policy in favour of the employee for a minimum of three times the annual total emolument of the employee.

This law is applicable to employers in the public service of the federation and for employers in the private sector with a minimum of five employees. The insurance cover is mandatory for all employees as long as they are in employment.

Notwithstanding the provisions above, employers that have better existing life insurance policies for their employees, in terms of benefits, are encouraged to maintain such policies.

This is in accordance with the guidelines jointly issued by National Insurance Commission (NAICOM) and National Pension Commission (PenCom) for life insurance policy for employees as made compulsory by the Pension Reform Act 2004.

The policy provides cover to the insured against death. Insurance coverage is for 12 months, from January through December, and shall be renewable at the end of each coverage year.

After the life insurance policy has been arranged through the purchase of a life policy issued by a Nigerian registered insurance company, licensed and authorised to conduct life insurance business by NAICOM under the Insurance Act 2003, all employers are required to display a copy of the group life insurance certificate in a conspicuous place within their premises.

A copy of the insurance certificate is required to be displayed in a conspicuous place within the premises, for the information of the employees, as evidence of having taken such policies. The insurance certificate is to be issued to employers by the insurer within a month from the policy inception/renewal date.

Besides, employers are required to send a copy of the insurance certificate with the schedule of benefits to PenCom and the Pension Fund Administrators (PFAs) where the employees maintain their Retirement Savings Accounts (RSAs), not later than 31st March every year.

The premium payable on the policy is to be pro-rated as applicable where an employee joins the scheme in the course of the year. Where an employee leaves the service of the employer before the expiration of 12 months, the premium paid relating to the unexpired period, shall be returned or set aside to the credit of the employer.

Insurers are expected to ensure that employers comply with the minimum insurance cover of three times the annual total emolument of each employee.

Each employer shall obtain an insurance certificate from the insurer and such certificate shall be accompanied by a schedule, which shall indicate amongst other things, the period of coverage, the number and details of staff at inception/ renewal date, their total emoluments, the benefit payable and the annual premium/date of full payment.

Employers are required to commence renewal negotiations in writing, within two months to the expiration of the current insurance coverage. Such negotiation must be concluded before the last day of the current cover.

Full payment of the insurance premium shall be made, at the latest, on the first day of insurance cover. Where an employer fails to effect full payment of premium at the stipulated time, the insurer shall report such failure to PenCom within 14 days of non-receipt of premium.

The employer shall fully bear all costs in relation to procurement of this policy, and this shall be in addition to, and separate from, the contributions to be made by the employer to each employee's Retirement Savings Account, as required by the Act.

Where an employee dies, the employer shall immediately commence death benefit claim on behalf of the deceased, as prescribed in the operational terms of the policy.

Employer shall notify employee's PFA and PenCom, of the employee's death stating the claim amount receivable. Employee's PFA shall validate claim amount and where discrepancies arise, this must be resolved with the employer.

In case an employee is missing, the employer shall report this immediately to the employee's PFA, Insurer and PenCom. Claims are required to be settled by the insurer within seven working days of receipt of complete documentation and acceptance of liability.

Information on any discrepancies on claims or its non-settlement within the time, are to be sent to PenCom by the employer and employee's PFA immediately.