Revised Guideline for Group Life Insurance for Employees

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Introduction

THIS guideline was jointly issued by the National Insurance Commission (NAICOM) and the National Pension Commission (PenCom) pursuant to the provisions of the Pension Reform Act (PRA) 2014 relating to procurement and maintenance of Group Life Insurance Policy in favour of employees. It is also to establish uniform set of rules and standards in relation to the application of the framework stated hereunder.

Legal Framework

Section 115 of PRA 2014, provides that: “The Commission may make regulations, rules or guidelines as it deems necessary or expedient for giving full effect to the provisions of this Act”.

Section 4(5) of PRA 2014, provides that “every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of three times the annual total emolument of the employee and premium shall be paid not later than the date of the cover.”

Section 4(6) also provides for situations “where the employer failed, refused or omitted to make payment as and when due, the employer shall make arrangement to effect the payment of claims arising from the death of any staff in its employment during such period.”

Section 8(1) of the PRA 2014 provides that “where an employee dies, his entitlements under the Life Insurance Policy maintained under the Act shall be paid by an underwriter to the named beneficiary in line with Section 57 of the Insurance Act.”

Section 9 of PRA 2014 provides that “where an employee is missing and is not found within a period of one year from the date he was declared missing, and a board of inquiry set up by the Commission makes a determination that having regards to available information and all relevant circumstances, it is reasonable to presume that the employee is dead, the provisions of Section 8 shall apply.”

Section 57(1) of the Insurance Act 2003 provides that “a policy of insurance shall not be made on the life of a person or other event without inserting in the policy the name of the person interested in it, or for those whose benefit or on whose account the policy is made.”

Section 57 (2) of the Insurance Act 2003 provides that “the provisions of subsection (1) of this section shall invalidate a policy for the benefit of unnamed persons from time to time, falling within a specified class or description if the class or description is stated in the policy, with sufficient particularity to make it possible to establish the identity of all persons who at any given time are entitled to benefit under the policy.”

Section 120 of PRA 2014 defines “annual total emolument in relation to Group Life Insurance Policy to be maintained by an employer means the gross emoluments of an employee or deceased person”.

General Requirements

The employer shall fully bear all costs in relation to procurement of Group Life Insurance Policy, and this shall be in addition to, and separate from the contributions made by the employer to each employee’s Retirement Savings Account (RSA), as required by PRA 2014.

The Group Life Insurance Policy shall be effected through the purchase of a Life Insurance Policy issued by a Registered Insurance Company, licensed and authorised to conduct Life Insurance Business by the National Insurance Commission (NAICOM) under the Insurance Act 2003.

For ease of administration, a consortium of eligible insurance companies, as determined in paragraphs 3.1 and 3.4 of the Guidelines, may be constituted for the purpose of providing life insurance cover for employees.

Employers shall be at liberty to engage the services of any insurance company or broker licensed by NAICOM to transact life insurance business that satisfies the eligibility criteria in paragraphs 3.1 and 3.4 of the Guidelines.

A Life Insurance Company shall not be allowed to underwrite the Group Life Insurance Policy of its employees.

The Group Life Insurance benefits due to the beneficiary shall not be encumbered or subject to any deductions by both the employer and the insurance company.

As stipulated in Section 9 of the PRA 2014, the National Pension Commission (PenCom) shall set up a Board of Inquiry, membership of which shall include NAICOM, for the consideration of any case of missing employee referred to it by the employer, for the purpose of insurance claims.

Eligibility of Insurance Companies

An Insurance Company shall be licensed by NAICOM to carry on life insurance business in order to qualify to provide Group Life Insurance under PRA 2014.

NAICOM shall make public the list of licensed and registered insurance companies eligible to conduct life insurance business.

NAICOM shall forward the list of licensed and registered insurance companies eligible to conduct life insurance business to PenCom annually.

Such eligible insurance companies shall continue to comply with PRA 2014 as regards:

a. Transfer of its legacy pension portfolio in line with Section 47 of the PRA 2014;

b. Remittance of monthly contributions (i.e. employer and employee portions) into the RSAs;

c. Procurement of life insurance policies for its employees; and

d. Settlement of fully documented insurance claim arising from the PRA 2014.

Group Life Insurance Policy Coverage

The Group Life Insurance Policy shall provide cover to the insured against death. Insurance coverage shall be for twelve (12) months, and shall be renewable at the end of each period.

The premium payable on the Group Life Policy shall be pro-rated as applicable where an employee joins the Contributory Pension Scheme (CPS) in the course of the year.

Where an employee leaves the service of the employer before the expiration of twelve months, the insurance company shall return or set aside to the credit of the employer the premium relating to the unexpired period.

Insurance cover is mandatory for all employees under the CPS as long as they are in employment.

The insurance company shall ensure that employers comply with the minimum insurance cover of three times the annual total emolument of each employee (i.e. 300% of gross emolument).

Annual Total Emolument, for the purpose of Group Life Insurance Policy under the PRA 2014, shall be the gross emolument of an employee.

Gross Emolument is annual total remuneration for the employee before any deductions.

Employee may notify PenCom of non-compliance with respect to the application of Gross Emolument.

Notwithstanding the provisions of the minimum insurance cover of three times the annual total emolument of each employee (i.e. 300% of gross emolument) , employers that have existing Group Life Insurance Policies for their employees, which have enhanced benefits when compared to the minimum may maintain such policies.

Conclusion

The above provisions of the guidelines have been brought out here with the aim of enlightening employees, employers, trade unions and pension desk officers on issues connected with Group Life Insurance for employees. Next week, we will be concluding discussions on the guidelines, which can be accessed on the websites of the two regulatory agencies.

Comrade Takor mni, can be reached directly for comments and reactions via Email: [email protected]; WhatsApp: +234 8037861900. Comments and observations can also be made through the interactive platform at the bottom of this page.

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