Disheartening as the news and updates on the collapsed 21-storey Ikoyi tower have been, we cannot stop talking about the lessons, particularly, in ways that they would help shape our future regulations and compliance.
Now in the phase of recovery management of the disaster, it is unimaginable that the victims - survivors and dependants of deceased persons - will probably have to wait for the decision of an investigative panel before receiving any compensation whereas same would have been addressed by the deposit payments from the insurers of the construction, if there was a valid insurance in place.
A media report, last week, stating the confirmation of the Nigeria Insurers Association (NIA) that it received NO RESPONSE from its members to its circular requesting information about the status of the insurance of the project makes the situation even more disturbing.
Could it be true that a project of such magnitude did not have genuine and valid insurance coverage? This is a question best left for the panel set up by the Lagos State Government to find answers to.
If There Was Insurance Coverage...
The minimum required type of insurance for the construction project would have been Contractor All Risks (CAR) Insurance, which covers Civil Works, Equipment on site, Cost of Removing Debris and General Third Party Liability over the duration of the project, often more than a year.
The insurance would have been based on either the total construction costs or percentage of the costs depending on the extent the Project Owner or Contractor would wish to go to ensure adequacy of insurance, in the event of any unexpected and unfortunate occurrence.
This type of insurance, which focuses on liabilities, would provide limits of liabilities for each of the four sections mentioned earlier; and it should be noted that these limits could be in tens or hundreds of millions of Naira.
Persons covered by the General Third Party Liability are those in the vicinity of the project but not part of the workforce involved in the project. Put simply, those who were either just visiting the site to appreciate the level of progress or to make enquiries would be the real third parties.
Accordingly, in the event of a claim as it occured, insurers would scrutinize to ensure that those within the site at the time of the incident were meant to be there.
Another type of insurance for the project would have been Professional Indemnity Insurance for the Architects and Structural Engineers in case their works and/or advices turn out to deliver wrong and unwanted outcomes, as we had.
In some instances, beyond the aforementioned types of insurance, the Project Owner may take out different types of insurance to protect his/her project from scratch.
The employees would have been covered by the company's Group Life Assurance policy as required by the Pensions Reforms (Amendment) Act 2014 and Employees Compensation Act 2010 administered by the National Social Insurance Trust Fund (NSITF).
Therefore, there would have been insurance coverage for every aspect of the project from end to end.
Possible Payouts by Insurers
If this project was insured through any or all the types of insurance described above, the Nigerian insurance industry would have been calculating the estimates of the payouts, and possibly made deposit payments to the insured (the Contractor) to ease the immediate pressure often associated with such events.
Based on the total construction costs of the 21-storey tower, the estimate of claims payouts would have been in billions of Naira (millions of US Dollars), considering the numerous parties involved in the project.
Like with the recent reports of claims paid, NGN9b of the estimated NGN20b, to insurance policyholders for violent destruction of insured properties following the EndSARS protest, insurers of the collapsed tower would have began to prepare to make payouts to claimants.
Taking the CAR policy, for example, and depending on the limits of liability, huge claims payouts would go for Civil Works.
Cost of removing debris as we saw to ascertain that no human bodies were left and the site put back to normal would have been paid by the insurers.
Payouts for the third parties would also have been in millions allowing each approved case a reasonable sum of money, not to compensate for lost lives but support the recovery process.
Importantly, even the Government of Lagos State would have seen the need to have representation of the insurance industry on the investigation panel, had there been insurance coverage for the project.
For the size and magnitude of the project, the possible sum of the claims payout by insurers would have been mind-boggling.
Has the Insurance Industry Been Saved from Trouble?
Ordinary minds would say, Yes to this question, and they won't be wrong, however analysts of the insurance industry in Nigeria know that this is a "Warning Notice".
The growth of the insurance industry by Gross Written Premium is reliant on the compliance level with the laws on one hand and the enforcement of the consequences of non-compliance on the other hand. The industry desires more compliance, and accordingly, more income generating business.
Section 64 of the Insurance Act 2003 states that:
(1) "No person shall cause to be constructed any building of more than two floors without insuring with a registered insurer his liability in respect of construction risks caused by his negligence or the negligence of his servants, agents or consultants which may result in bodily injury or loss of life to or damage to property of any workman on the site or of any member of the Public;
(2) The duty to insure under subsection (1) of this section shall arise when a building in under construction;
(3) A person who contravenes subsection (1) of this section commits an offence and on conviction shall be liable to a fine of N250,000 or imprisonment for three years or both."
Therefore, when there is increased compliance with the law, there will be accompanying expectations that compensations or claims would be paid when insurers are required to do so. This is why what happened should be a warning to insurers as they would be either standing beside the Spokespersons of the Government to give assurances to the families of the deceased and the survivors or just doing the talking while the officials of Government support them.
Disasters have been known to be the primary factor that awakened the insurance industry and the responses of the stakeholders became the contributory factor for the growth of the insurance sector significantly. The 2004 Indian Ocean tsunami, which caused the death and/or disappearance of at least 230,000 people in 14 countries left behind a stronger and growing insurance sector in Asia today.
The insurance industry in Nigeria must be prepared to grow in the face of disasters whether they lead to claims payouts or not.
Indeed, the discussion to have insurance scheduled as part of our national emergency management process should start today to ensure it is used to address the issues of resettlement after rescues have taken place.
Our future is quite challenged, especially with emergent risks associated to climate change, and insurance remains the most tested risk management mechanism for the protection of our wealth - people! Shall we continue to look at it from a distance?
The earlier Sub-nationals in Nigeria domesticate the insurance laws, the better we will all be positioned to address the issues that cause us pains and anguish, compounding our fights against poverty. This should be the top priority of the National Insurance Commission (NAICOM) in 2022 as Adviser to the Federal Government of Nigeria on all insurance matters.