For 22 years, the Compulsory Building Insurance Law has been in existence. Still, its uptake by developers, contractors, and house owners has been extremely poor, just as only two of the country’s 36 states have domesticated the law. Stakeholders stress the need for aggressive law enforcement to stem the continued loss of lives and investments, VICTOR GBONEGUN reports.
The failure of more than 90 per cent of states in the country to implement the Compulsory Building Insurance Law 22 years after its promulgation has failed to contribute its quota to curbing incessant cases of building collapse. To date, only Lagos and Ogun states have implemented the policy.
Under the Cap 117 of the 2003 Insurance Act, building insurance covers structures occupied by tenants, lodgers or licensees, and any building to which members of the public have access to for the purposes of obtaining educational or medical services. The law also includes buildings erected for purposes of recreation or transaction of businesses.
Among other things, the law was designed to remove the worries that site workers or members of the public who inadvertently sustain injuries, or lose their lives in the event of a collapsed construction work would be taken care of, and also covers damages done to third-party property.
In spite of all these, many housing developers, contractors, and homeowners hardly obtain construction insurance despite the law being domesticated by some states. This can be gleaned from the fact that the demand for home and property insurance has been abysmally low.
Specifically, the Act under Section 64 prescribes that every owner or contractor of any building under construction with more than two floors must have an insurance cover in case of accidents, which may result in death of workers on-site, bodily injury to members of the public, or damage to property.
The policy also covers losses incurred from building damages such as fire, flood, storm, earthquake, vandalism, malicious damage, theft, collapse accidental damage, legal liability, loss of rent etc.
An independent survey by The Guardian showed that only two out of every 10 property subscribe to insurance cover. Some of the reasons adduced for such apathy include religious beliefs hinged on the fact that “God protects and forbids disaster,” ignorance, and difficulties in accessing insurance claims.
The compulsory insurance is rated per plot and floor at N5, 000 each. Two floors building on a plot range from N15, 000, but two floors on two plots are pegged at N20, 000. Specifically, the policy also mandates compulsory insurance coverage for buildings under construction of over two floors, and a fine of N250, 000 or three years imprisonment for defaulters.
According to a report by the Building Collapse Prevention Guild (BCGP), and an evaluation of the cases by The Guardian, in the last 50 years, building collapses caused over 1,578 deaths in over 629 reported incidents across the country. It is worthy of note that in the majority of these cases, the property are not covered by property insurance.
With over 326 cases of building collapse, Lagos State has the highest number of recorded incidents, representing over 59 per cent of the total cases. For the period that the report covered, the top seven states leading the collapsed building chart are Lagos, Anambra, Oyo, FCT, Kano, Ogun, and Delta. The least seven states are Gombe, Bayelsa, Yobe, Taraba, Borno, Katsina and Kogi.
The recent collapse of a three-storey structure under construction at Oriwu Estate, near ELF Bus Stop on the popular Lekki-Epe Expressway, where about four people were confirmed dead, and several injured, reinforced the need for insurance cover for buildings as the owner and victims are not covered by any insurance policy.
The Guardian learnt that many of the storey buildings that have recently collapsed across the country had no insurance cover; in most of the situations owners or developers find it hard to rebuild, or repair the structure as such unforeseen circumstances were often not captured by an insurance policy.
For instance, in cases of building collapses that occurred recently, many occupants of the buildings were reportedly not covered by any insurance policy. Those who sustain injuries in such situations are left at the mercy of the government or public sympathy, including their feeding and that of their families.
The absence of insurance cover on buildings also poses great dangers to adjoining buildings in case of collapse, as damages to surrounding property are usually difficult to address without an insurance cover.
Still regrettable, is the fact that costs of rebuilding, or repairing collapsed structures (which are often massive) are left to the building owners. In a situation where the costs are beyond what the owner can bear, the collapse structure may be abandoned leading to long-term loss of property value.
Worse still, developers, contractors, or owners of collapsed property could face litigation liabilities, which mostly run into millions-of-naira where a project is not covered by insurance
Despite its importance in shielding the property, invested funds, and occupiers of the buildings from massive losses, homeowners, developers and landlords perennially undermine the importance of property insurance. This perhaps explains why Lagos State recently incorporated compulsory building insurance in its Urban and Regional Planning and Development Law.
Existing buildings that were in use prior to the commencement of the compulsory insurance law, are obligated to submit the certificate of insurance to the state’s Building Control Agency (LASBCA) for verification. This notwithstanding, the compliance level, implementation and enforcement are far from encouraging.
As per the Ogun State Building Production Management Authority Regulation (OGBPMA) 2022, buildings exceeding two floors are mandated to have an All-Risk Insurance Policy certificate, which ensures the coverage for both human and material assets during the entire construction period.
Additionally, the contractor or developer is responsible for maintaining the All-Risk Insurance Policy, which ensures that persons engaged to work on-site, or who have lawful access to be on-site are also protected against any form of injury, and loss or damage.
Industry professionals link the unencouraging application of the law to weak enforcement mechanisms, insufficient insurance education, improper staffing of building control agencies, and a lack of confidence in some of the insurance firms.
Lamenting the low uptake of the property insurance policy in the country, an insurance practitioner, Mrs Lola Olawore of Staco Insurance Plc, lamented that the majority of building owners don’t want to invest in insurance.
“People don’t want to obtain insurance policies unless the enforcement by appropriate authorities is strong like the recent effort on Third Party Vehicle Insurance. Maybe because the awareness about property insurance is still low, people don’t want to do it unless it is under compulsion,’’ Olawore said.
The Chief Executive Officer of the National Insurance Commission (NAICOM), Olusegun Omosehin, who recently expressed worries about low insurance penetration, said that the long-term goal of the regulator is to move the penetration to about five per cent in 1notears.
Omosehin deplored the low adoption of insurance as a culture for managing risks in Nigeria, adding that the nation still has a situation where a majority of the population were not taking up insurance as a risk management mechanism.
The Chairman, Council of Registered Builders of Nigeria (CORBON) Dr Samson Opaluwah, noted that the Contractor All-Risk (CAR) Insurance policy, which is mandatory, has been iarelace all along. He stressed that its main aim in contract law is for building and workers on site to be protected.
CAR insurance protects construction projects against various risks, covering damages to works in progress, materials, and equipment, as well as, third-party liabilities.
Beyond this, he emphasised that investors need to protect their investments through insurance so that when building collapses occur, lives and investment losses are mitigated.
“As a council, we have a joint committee with NAICOM on how to address the issue. We also have relationships with some underwriters to ensure that our members, workmen and the project are all covered.
“We have suggested to the government to engage consultants, who are built professionals to monitor projects in their areas of specialty,” Opaluwah said, adding: “Most of the laws concerning buildings are domesticated in states, and the states’ planning authorities have to strengthen enforcement of the law.
For the President of the Association of Town Planning Consultants of Nigeria (ATOPCON), Adebisi Adedire, the compulsory building insurance law simply exists on paper, while the implementation strategy has been poor overtime in the country.
He explained: “The Lagos State Building Control Agency has embedded in the building code that any structure that is above two or three floors should have an insurance cover in case of any eventuality… Affected agencies especially LASBCA, the Lagos State Physical Planning Permit Authority (LASPPPA), and Material Testing Laboratory in a state like Lagos are naturally supposed to monitor the implementation,” he said.
Adedire added: “One of the major problems that is affecting the building insurance uptake is the fact that most contractors, developers, and house owners are not willing to be sincere with the value of their property. In a house that a developer spent more than N200 million to build, he may tell the insurance agent that the house is worth just N50 million, and by the time the disaster happens, it is based on the face value given to the insurance firm that they will pay the claims.”
A past Chairman of the Nigerian Institution of Estate Surveyors and Valuers, (NIESV) Lagos Branch, Adedotun Bamigbola, argued that the policy is being affected by the age-long belief that insurance firms don’t pay claims as at when, but just collect money from subscribers persistently.
The gray areas that have hindered effectiveness of the policy, according to him, are inadequate monitoring/implementation of the policy, as well as failure of the government to apply appropriate sanctions.
“As chairman of the NIESV some years back, we had an engagement with the state government, and the Nigerian Insurers Association (NIA), as well as our national body to see what can be done to get things, but unfortunately there was no progress,” he said.
