ISSUES OF ENFORCEMENT OF MOTOR VEHICLE

INSURANCE POLICY: A ROAD SAFETY PERSPECTIVE

A PRESENTATION BY

OSITA CHIDOKA AT THE INSURANCE FUTURE SUMMIT, TRANSCORP HILTON HOTEL, ABUJA

APRIL 7- 8, 2008

Federal Government Intervention

PREAMBLE

FEDERAL ROAD SAFETY COMMISSION (FRSC)

(1988-2008)

FRSC was established vide Cap 141 Laws of the federation asAmended by the FRSC Act 2007

Due to rapid Economic growth in the 70’s & 80’s,and lack of a Lead

agency in Road Safety,Nigeria witnessed

an Increase in Road Traffic

accidents

ROAD TRAFFIC CRASHES

IN

NIGERIA

ROAD CRASH RECORDS BETWEEN 1996-2006 (NIGERIA)

YEARFATAL SERIOUS MINOR TOTAL

CASESNO. KILLED

NO.INJURED

TOTAL CASUALTY

DOWNWARD OR UPWARDMOVEMENT OF CRASH SEVERITY

1996 4790 6964 4688 16442 6364 15290 21654 DOWNWARD

1997 4800 7701 4987 17488 6500 10786 17286 DOWNWARD

1998 4757 7081 4300 16138 6538 17341 23879 UPWARD

1999 4621 6888 4356 15865 6795 17728 24523 UPWARD

2000 5287 6820 4499 16606 8473 20677 29150 UPWARD

2001 6966 8185 5379 20530 9946 23249 33195 DOWNWARD

2002 4029 7190 3325 14544 7407 22112 29519 DOWNWARD

2003 3910 7882 2572 14364 6452 18116 24568 DOWNWARD

2004 3275 6948 4051 14274 5351 16897 22248 DOWNWARD

2005 2299 4143 2620 9062 4519 15779 20298 DOWNWARD

2006 2600 5550 964 9114 4944 17390 22334 UPWARD

2007 9132 4916 20944 25860 UPWARD

Source: Nigeria Police/Federal Road Safety Commission- 2007

KEY: UPWARD MOVEMENT OF ROAD CRASH . DOWNWARD MOVEMENT OF ROAD CRASH

YEARLY COMPARISON OF FATAL, SERIOUS & TOTAL CASES OF CRASHES

1644

247

9069

64

1748

848

0077

01

1613

847

5770

81

1586

546

2168

88

1660

652

8768

20

2053

069

66 8185

1454

440

2971

90

1436

439

1078

82

1427

432

7569

48

9062

2299 41

43

9114

2600

5550

9132

0

5000

10000

15000

20000

25000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

T0TAL CASES FATAL CASES SERIOUS CASES

source: Nigeria Police /Federal Road Safety Commission 2007

The issues that gave rise to the high incidence of road carnage in 2001 are what we are determined to effectively tackle in the 4year Rolling plan under the Mass Transportation sector. For example, staff morale was so low in 2001, there was paucity of logistics, and corporate inertia owing to the then merger with the Police

There is a rise in crashes compared previous year 2006.This shows that there is need for intervention to check this upward trend

SOME ALARMING FACTS• FERMA would need an estimated 70 billion Naira to

rehabilitate 3,500km of road network annually under the Systematic Road Strengthing and Enhancement Programme (SRSE)……………Daily independent, Thursday February, 2008

• The Lagos-Ibadan-Ogbomosho-Ilorin-Jebba-Minna Expressway in Nigeria is ranked amongst the 23 most dangerous roads in the World by the Association for Safe

International Road Travel, U.S.A. The road is described as a congested road with deep potholes and a median in disrepair that links northern and southern Nigeria.

• There are an estimated 15 million drivers in Nigeria, however license production by FRSC till date stands at an estimated 3,686,303…………………. Department of Motor Vehicle Administration (FRSC, October, 2007)

ROAD TRAFFIC CRASHES (RTCs): THE SOCIO-ECONOMIC COST

• It is estimated that developing countries currently loose an estimated $100 billion every year from Road Traffic Crashes, twice as much as its total development assistance ……….(The World Bank Group, www.worldbank.org/transport/roads/safety.htm, Accessed 4th Feb, 2008)

• An estimated 50 million people are injured and 1.2 million die every year from Road Traffic Crashes….(RTA: Emerging Epidemic, Indian Journal of Neorotrauma, Vol. 3. No.1, 2006)

• Road traffic Death to increase by 80% in developing countries by 2020 if adequate measures are not taken ……….(WHO, World Health Day report, April 2004)

THE INSURANCE INDUSTRY IN NIGERIA

WHAT IS THE VEHICLE INSURANCE POLICY

• ‘NO PERSON SHALL USE OR CAUSE OR PERMIT ANY OTHER PERSON TO USE A MOTOR VEHICLE ON A ROAD UNLESS A LIABILITY WHICH HE MAY THEREBY INCUR IN RESPECT OF DAMAGE TO THE PROPERTY OF THIRD PARTIES IS ISSUED WITH AN INSURER UNDER THIS ACT.’ Section 68 (1) of the INSURANCE ACT 2003 ACT No.1.

• THE ABOVE ‘…SHALL COVER LIABILITY OF NOT LESS THAN

N1MILLION)’. Section 68 (2).

• THE ABOVE ‘…SHALL BE IN ADDITION TO THE LIABILITIES REQUIRED TO BE INSURED UNDER THE MOTOR VEHICLE (THIRD PARTY) INSURANCE ACT 1950…’ Section 68 (3).

• ‘A PERSON WHO CONTRAVENES THE PROVISIONS OF THE SECTION COMMITS AN OFFENCE AND LIABLE ON CONVICTION TO A FINE OF N250,000 OR IMPRISONMENT FOR 1YEAR OR BOTH’. Section 68 (4).

COMPLIANCE LEVEL OF MOTOR VEHICLE INSURANCE POLICY

• MOST DRIVERS DRIVE WITHOUT INSURANCE PAPERS AND DO NOT PATRONISE INSURERS

• MOST PEOPLE DO NOT HAVE CONFIDENCE IN INSURANCE CLAIMS

• SOME DRIVERS DRIVE WITH EXPIRED INSURANCE PAPERS

• MOST DRIVERS USE TOUTS TO OBTAIN FAKE/FORGED INSURANCE DOCUMENTS

• COMPLIANCE IS AT A LEVEL OF NEAR NON-COMPLIANCE

LEVELS OF COMPLIANCE WITH MANDATORY THIRD PARTY

VEHICLE INSURANCE

COUNTRYCOMPLIANCE

1. Costa Rica 84%

2. UK 90-95%

3. Ghana 70%

4. Pakistan 3-5%

5. Nigeria ?

Source: GRSP Focus, Motor Vehicle insurers & Road Safety, 2003

‘The Insurance Companies, according to former President Olusegun Obasanjo smile at you when you come to pick up a Policy and frown at you when you come to make a claim. Charlatans , knowing fully well that nobody comes for claims came with fake Insurance Companies only for one purpose- to give people paper to get pass the Police at check points. The system is so chaotic that even the Insurance Companies are finding it difficult to identify their own Policy Certificates while the Law Enforcement Agencies are completely incapacitated in that regard’.-04 November, 2007 11:00:00 BETHEL OBIOMA

PICK A POLICY

WITH US AS WE

LOVE YOU TOO MUCH

THIS IS TOO

GOOD TO BE

TRUE!!!

AN ACCIDENT OCCURS

WHAT CLAIM?

YOU ARE NOT

ENTITLED TO ANY

GIVE ME THE

CLAIM YOU

PROMISED

LOW PUBLIC CONFIDENCE IN POLICY

MOTOR VEHICLE

INSURANCE POLICY

MOTOR VEHICLE

INSURANCE POLICY

PICTORIAL OF ROAD CRASHES

A FIRE ROAD CRASH ALONG BODE SAADU ROAD INVOLVING AN

OVERLOADED BUS ALL OCCUPANTS WERE TRAPPED AND BURNT ALIVE

A ROAD CRASH INVOLVING A BUS THAT ROLLED OVER

A ROAD CRASH INVOLVING A CAR ALONG BODE SAADU ROAD

ROAD CRASH PICTURES

THE WAY FORWARD

SOME INITIAL CHALLENGES OF FRSC DATABASE

• The FRSC Database was last updated in 2003 .• Corrupted Data• There was no link between vehicle information

and their registered keepers. • The FRSC vehicle license production stands at

8million number plates. • However, only an estimated 0.3m records of

registration have been captured in the database due to non return of form MVA01 by the various State Boards of Internal Revenue

NEW DEVELOPMENTS (FRSC DATABASE)

• A Consulting firm has been engaged to review and re-engineer the Vehicle License process.

• The process of overhauling the National Drivers License Scheme is in progress.

• Such processes will ensure that Motor Vehicle licenses would only be issued upon presentation of valid insurance policies (minimum third party).

• The Drivers License database has been cleaned and updated with 2.4 million records.

• Online verification of Drivers License will commence soon to deal with the issue of fake/multiple drivers license

• 12 VSATs installed in the Zonal Commands and another 85 to be deployed in all the License processing centers/Sector Commands

FRSC DATABASE

FRSCDATABASE

DRIVERS LICENSES

INFORMATION

VEHICLE LICENSE

INFORMATION

OFFENDERS REGISTRY

PERSONAL INFORMATION

VEHICLE INSURANCE

INFO

To determine insurance premium

The FRSC Data base is already Host to information of estimated

2.4 million drivers

HOW DO WE IMPROVE THE NIGERIA SITUATION ?

THE INSURANCE INDUSTRY: To partner with the FRSC in the following area’s:

• IN UTILIZING & FUNDING THE FRSC DATA BANK LICENSING SCHEME

• PROVISION OF PATROL EQUIPMENTS• JOINT ENLIGHTENMENT CAMPAIGNS• SUPPORT /SPONSOR THE PROVISION OF ‘ROAD SAFETY

FUND’ IN THE INSURANCE ACT • TO PROMOTE INDIVIDUAL PASSENGER INSURANCE BY

COMMERCIAL TRANSPORT COMPANIES

GOVERNMENT: TO ENACT A NEW INSURANCE ACT AND PROVIDE FOR THE ‘ROAD SAFETY FUND’ SIMILAR TO THE ‘FIRE SERVICES MAINTENANCE FUND’ IN SECTION 65(4) OF THE 2003 INSURANCE ACT.

“SAFER ROADS, FEWER CLAIMS”

HOW CAN FRSC ENFORCE VEHICLE INSURANCE POLICY ?

OPERATION

‘FREE CHECKS’

OPERATION

‘FREE CHECKS’

INSURANCE

POLICY

CAMPAIGN

INSURANCE

POLICY

CAMPAIGN

FULL ENFORCEMENT

SUBTLE ENFORCEMENT

EDUCATING

PERSUATION

OPERATIO

N ‘MUST

BE

INSURED’OPERATIO

N ‘MUST

BE

INSURED’

OPERATION

ARE U INSURED?

OPERATION

ARE U INSURED?

CREATING AN ENABLING ENVIRONMENT FOR THE INSURANCE INDUSTRY: OUR

MISSION FIGHT PIRACY THROUGH ICT SYSTEMS:

– Build a robust and enhanced Database for the ULS that shall synchronize insurance policy information.

– The FRSC already has an information database of more than 2.6 million drivers

– The Data base shall host records of all licensed drivers and vehicle

– Offenders register that shall capture:– Driving history records (Crash & violation records)– Drug & Alcohol records

OPTIMIZE ENFORCEMENT:– Ensuring that registered/re-registered vehicles are insured and

are “Road worthy”.– Enforce both driver and vehicle insurance.

“TO RESTORE THE INTEGRITY OF THE NIGERIAN DRIVERS” LICENSE

ROAD SAFETY FUND

A CASE FOR A ROAD SAFETY FUND AS % PREMIUM

THE CURRENT INSURANCE ACT:– ‘EVERY PUBLIC BUILDING SHALL BE INSURED WITH A

REGISTERED INSURER AGAINST THE HAZARDS OF COLLAPSE, FIRE…’ Section 65 (1).

– ‘0.25 % OF THE NET PREMIUM RECEIVED BY EVERY DIRECT INSURER ….SHALL BE PAID QUARTERLY BY EVERY INSURER INTO A FIRE SERVICES MAINTENANCE FUND… FOR THE PURPOSE OF PROVIDING GRANT OR EQUIPMENT TO INSTITUTIONS ENGAGED IN FIRE FIGHTING SERVICES’ Section 65 (4).

THE PROPOSED ROAD SAFETY FUND:– THE PERCENTAGE OF INSURANCE LEVIES DEDICATED TO ROAD

SAFETY SHALL BE DEDICATED TO ACCIDENT PREVENTION MEASURES, ROAD SAFETY EQUIPMENT, ICT TECHONLOGIES TO SUPPORT ROAD SAFETY FRONT-END OPERATIONS, RESCUE OPERATIONS & ROAD FURNITURE.

In the state of Victoria, AUSTRALIA insurance levies dedicated to Road Safety were intially 3% of premium, which was later increased to 10%.

In ZAMBIA, there is a proposal to apply a 10% levy on (compulsory) third party insurance which is estimated to amount to about $1million per annum

FINLAND, is the pioneer country to enforce the use of insurance levies to support road safety activities for over 40 years. It has been reported to raise $8million per year for education & publicity campaigns on Road Safety.

The province of Quebec, CANADA uses insurance premiums from motor vehicle insurance to fund road safety activities, like education on road safety and public enlightenment.

WORLD BEST PRACTICES

The GHANA National Road Safety Commission ACT, 1999 provides that a levy on mandatory third party insurance is dedicated to Road Safety infrastructure.

Source: Wetteland, T & S. Lundebye (1997)

WHO BENEFITS FROM FRSC EFFICIENCY ?

• THE NATION- REDUCED ACCIDENTS, REDUCED CAR THEFT (SECURITY), A BETTER IMAGE TO INVESTORS

• INSURERS- MORE DRIVERS NOW INSURE THEIR VEHICLES (LARGER CUSTOMER BASE), MORE MONEY, FEWER CLAIMS FROM THE INSURED AS A RESULT OF ACCIDENTS AND CAR THEFT REDUCTION

• ROAD USERS- CONFIDENCE IN INSURANCE COMPANIES WHILE FEWER PEOPLE INVOLVED IN ACCIDENTS AND GREATER PEACE OF MIND.

• DRIVERS/OWNERS- CONFIDENCE, SAFER ROAD, FULLER LIVES AND FEWER THEFT CASES

THANK YOU FOR

LISTENING