TUESDAY, 20 JULY 2010 01:12 MODESTUS ANAESORONYE  

 

The umbrella body of insurance companies in the country, the Nigerian Insurers Association (NIA), has defended its members’ involvement in the Nigerian National Petroleum Corporation (NNPC) insurance account, alleged to have been inflated to the tune of $363.8 million during a ten-year period.

 

The trade group said the pricing of insurance cover is greatly determined by some factors which relate to the level of risk undertaken by the provider of the cover and not fixed. Among the factors, the insurance body listed is the probability of a loss, the total amount of liability that may arise in the event of a loss, the level of safety mechanism in place, reactions of the global financial market to a particular risk in a given period and claim clauses.

 

Olusola Ladipo-Ajayi, chairman of NIA made the disclosure on Monday during a press briefing at the body’s secretariat in Lagos.He said the rates couldn’t have been detected in Nigeria since the country insured only about 43 percent of the corporation’s risk as at the current year of 2010. “Besides, the rates applied were determined in the London market and not by our members who cover a small proportion of the risk”, Ladipo-Ajayi said, stating that it is the standard insurance practice for those who take the larger proportion of a risk to dictate the terms for others to follow.

 

Defending the issue further, he said its members in the Nigerian market were bound to follow the lead of those who bear the greater proportion of the risks. “Nobody in the Nigerian insurance industry should be held responsible for variations in the NNPC insurance premium rates. So, don’t look at our members as having collaborated with foreigners to defraud the Nigerian government”, he stressed.

 

He also cleared the air on the alleged oath of secrecy entered between the insurers and the corporation, saying it is a standard business practice all over the world. “In every contractual relationship, there are terms and conditions that govern the contract and those who are not privy to the contract must have limitations with respect to the extent of information they can access”, he said.

 

According to him, an agreement restricting a party to a contract from releasing details of the contract to a third party without the express permission of the other party is not tantamount to concealment or falsification of facts.

 

He further clarified that with regard to the NNPC insurance contract, the restrictions had to do with management of information given by the insured to the insurers for the purpose of identification and rating of insured risks and not information generated by the insurers.

 

On the allegation that insurers introduced questionable clauses in order to repudiate genuine claims, Ladipo-Ajayi said insurance business is subject to terms and conditions which the insured is free to accept, reject or ask for further clarifications before entering into the contract.

 

Source:BusinessDay