Insurance Act – NIA Says No to Workman’s Compensation Bill [analysis]

The controversial Employee Compensation Bill has continued to attract criticisms and condemnation from Nigeria's Insurance Industry practitioners. The latest opposition to the Bill which is currently pending at the National Assembly is coming from the Nigerian Insurance Association (NIA).

In a strong worded memorandum to the Senate Committee on Employment, Labour and Productivity, NIA frowned at the legal document which seeks to replace the Workman's Compensation Act 2004 and its replacement with an Employee Compensation Scheme to be managed by the Nigerian Social Insurance Trust Fund (NSITF)

The association's knock against the Insurance Bill is coming on the heels of similar opposition to Bill by the National Insurance Commission (NAICOM) the apex insurance regulatory body in the country.

NIA which is the umbrella trade association of all insurance companies operating in Nigeria, had in the representation signed by its chairman, Mr. Wole Oshin argued that the NSITF which transmitted from the defunct National Trust Fund (NTF) is incapable of handling the scheme as proposed.

The prime indigenous insurance association said in the memo made available to Champion Insurance

that it had after a careful study and review of the proposed Bill concluded that the inability of NSITF to effectively manage the deductions from workers salary, resulting in non payment of NSITF benefits to retirees clearly attests to its allegation against it.

It explained that the Workmen's Compensation Act 2004 was enacted to provide benefits for work-related diseases, injuries, accidents and death. Over the years, insurance companies in Nigeria have been providing workmen's Compensation Insurance cover to private sector employers to enable them pay compensation to employees as required by the Act, emphasising that Nigerian insurers have played this role effectively by paying claims promptly as they arise as it is practised in most Common Law Jurisdictions and many other countries all over the world.

It was also of the opinion that it would be inappropriate and totally against the spirit of the Federal Government Reform Programme to again overburden a public institution with responsibilities that are being effectively managed by players in the private sector, saying,

"Nigerians are aware of how public institutions vested with monopolistic powers and duties have fared. We are not sure that Nigerians want to go through that experience again".

It pointed out that the management of risks of accident, disease and death, and paying benefits to victims is the domain of insurance industry, adding that the NSITF does not have the training, knowledge and expertise to manage risks.

"Under the present Workmen's Compensation Act the liability for Workmen's Compensation is on the Employers, and they are expected to insure the liability with insurance companies who must provide the money for payment of compensation whenever the need arises". It argued.

NIA drew the attention of the law makers to the under listed countries where the Workmen's compensation and the benefits proposed under the Bill are currently being managed by insurance companies .

1.India

In India, Employer's Liability Act of 1938 makes it imperative for insurance companies to provide cover for workplace injuries, diseases and death.

2.China

Employers Liability is a Compulsory Insurance in China. It is carried out in the scope of Dalian for Crew and Labour insurance within the category of Social Insurance.

3.Brazil

Here, it is a Compulsory insurance under social security benefits for workers. 4.Germany

Germany operates a system of Compulsory state insurance against accidents to workmen. This is backed by labour laws which date from 1884, 1885, 1886, 1887, 1900 to 1903.

5.Austria

It is a Compulsory insurance backed by the 1887 law.

6.France

France operates a system of compulsory state insurance against work related diseases, accidents, injuries and death and is backed by 1898 law.

7.United Kingdom

Workmen's Compensation (referred to as employer's liability) is a class of insurance underwritten by the insurance industry.

8.Russia

By the law which came into force on the 1st of January 1904, employers are bound to indemnify workers by insuring them with insurance companies.

Other countries where insurance companies undertake workmen's compensation insurance are Belgium, Sweden, Holland and Spain.

Continuing, the association stated that : "With Market Capitalization of over N600bn, a network of over 1000 branches in addition to very strong, reliable and efficient Information Technology infrastructure, there is no gain saying that the insurance industry is already equipped with adequate capacity to continue with the effective management of Workmen's Compensation insurance program".

It further stated that the Bill is an unnecessary duplication of statutes and roles, and should not be passed into law.

In addition, It said that the development is more curious now that the NSITF is proposing to reinsure the fund with insurers, arguing that its is absurd as NSITF do not have the authorization, technical competence and professional knowledge to engage in Insurance and reinsurance activities.

"Needless saying that the NSITF has failed many Nigerians in time past, and there is nothing to suggest that there is a change now", it went on.

The association therefore posited that the Workmen's Compensation in our opinion should remain with the insurance industry for the following reasons:

-Insurance industry remained the primary institution legally recognized to provide the technical expertise in Risk management and administration of this very crucial aspect of social insurance;

-The antecedent of the NSITF in the area of funds management does not seem to support its desire to assume a bigger responsibility which would impact directly on the life of workers.

-Also, the initiative of providing adequate compensation for workmen under the proposed Bill should be the responsibility of the Insurance Industry.

-The proposed system had not yielded any fruitful result even in other countries. South Africa for example had to revert to insurance system when the intended Self Insurance as proposed by bill was unable to meet their objectives.

-Insurance industry is effectively and robustly supervised by NAICOM and in addition, publicly quoted companies are regulated by (SEC), and Nigerian Stock Exchange (NSE) both in operations, corporate governance, and investment, amongst others. To this end, it further pointed out that Nigeria presently has 42 insurance companies authorized to provide the necessary cover for various types of risks including workplace injury, accident and death. This is even as it urge the Senate Committee on Employment, Labour and Productivity Committee to note: that there is in existence a Workmen compensation Act 2004 which provides benefits for injury, accident or death of an employee while in the work place and during working hours.

-That the regulation which should have enhanced the effective enforcement of the Act was yet to be provided by the Minister of Labour - Mr. Emeka Wogu

-That the proposed Workmen Compensation Bill 2010 would not materially add any value to the existing operational framework of compensating workers for losses suffered in the workplace.

-That the benefits to be provided by the Bill are employers liabilities which are within the scope of insurance and for which the insurance industry had been providing and should be allowed to continue to provide

-That the entire process of setting aside the fund to be managed by the NSITF from where the benefits would be paid as proposed in the Bill has the tendency to follow in the ways of such funds which had earlier been set up;

Consequent upon this, NIA pleaded with the Senate Committee to urgently put in place the regulation that would enhance the enforcement of the Workmen Compensation Act 2004, maintaining that he proposed Workmen Compensation Bill 2010 is unnecessary and would serve no useful purpose.