PROPERTY TRANSACTION GUIDE

Building disasters: Minimising loss through insurance policies
By SAMSON ECHENIM

Punch, Monday 31st May 2010

In the face of losses incurred by property owners as a result of incessant building collapse and fire incidents, SAMSON ECHENIM writes that Nigerians must learn to take refuge in building insurance.

It is no longer news that Nigerians are losing their hard

earned income to building collapse and fire. Recent cases of building collapse happen during construction, thereby drying up owners‘ investments without a chance to reap any benefit.

Insurance experts have attributed the loss incurred by property owners to ignorance. They say landlords will lose nothing if they insure their buildings.

A director at Cornerstone Insurance Plc, Mr. Dominic Ichaba, says despite the fact that building insurance is required by law and is cheap to maintain, landlords still do not know the importance of building insurance.

The insurance industry is now making fresh efforts to ensure that sections 64 and 65 of the Insurance Act, 2003, which requires that every public building must have a third-party insurance are adhered to. Third-party insurance is meant to protect people who come into the building.

Commenting on the extent of loss, Ichaba says it is high time the public began insisting on building insurance as they are the ones who are affected in most cases.

He says, "The law recommends that a third-party insurance be taken and members of the public are the ones being protected by the law, but you find out that they are not even aware. So, awareness must be created, so that people can take up litigations for their rights when the need arises."

The Public Relations Officer, Nigerian Council of Registered Insurance Brokers, Mr. Tope Adaramola, also acknowledges the existing laws and the renewed efforts in recent times to make people insure their buildings.

He says Sections 64 and 65 of the Insurance Act compel owners of public buildings to insure them. He defines public buildings as those where members of the public go in and go out.

According to Adaramola, in technical terms, public buildings are those where members of public ingress (enter) and egress (exit). They are buildings like cinema houses, shopping malls, hotels, schools.

Public buildings are not the only ones recommended by the Act to be insured. The Act also says that buildings above three floors should be adequately insured.

Daramola says, "It (building insurance) has been in the law, but people are not just obliging. We are now taking it up again so that the government can make it compulsory for landlords to insure even right from the planning stage.

"It is believed that if this legislation is followed, it will definitely bring down the loss on the side of landlords, while adequately covering members of the public who have no business to do in the buildings."

But to the Managing Director of Apapa-based Jafcon Industries Limited, estate developers, Mr. Onyebuchi Okafor, the level of poverty in the country is so high that landlords will not be able to service their insurance premiums.

Again, he says the level of awareness of insurance in Nigeria, especially property insurance, is very low.

Okafor says,"People do not have enough confidence in insurance to pay their losses. You find out that even with motor vehicle insurance, not many people are doing it even though they can afford to buy the cars."

He says an attempt to inculcate insurance cost into the cost of the building will result in losses for the developer as no one will be ready to buy such property.

"When you manage to sell, the new landlord is not likely to continue with the insurance contract. This thing is highly dependent on behavioural pattern of the people towards insurance and their perception of the nature of insurance contracts in the country," Okafor says.

An estate manager in Okota Lagos, Mr. Kunle Rasheed, does not only agree with Okafor. He notes that insurance companies are not always ready to pay claims.

He says, "It is not enough to create awareness. Though it is true that awareness creation is needed, I really do not believe that that is all the country needs to begin to embrace insurance. If you take a look at the economy generally, you will see that insurance is not playing a significant role.

"Nigerians expect players in the insurance industry to get things right. We expect them to embrace good practices and ethics. Every Nigerian has a common understanding of how insurance is being practiced in the country. Until that is changed and seen to have been done, I believe it will be difficult to get people to embrace insurance, whether building, vehicle, or life insurance."

Ichaba, however, explains that claims of unethical practices in the industry are now a thing of the past. He says by the Building Insurance Act, virtually all buildings can be categorised under several insurance options. He notes that non-payment of claims by insurance companies is no longer obtainable in the industry. He adds that the insurance industry has taken steps to ensure that genuine claims are paid.

"We have had cases of insurance companies not paying claims. All that is no longer obtainable in the industry now. Insurance companies have emerged bigger, operating in a stronger industry now," he says.

One more reason that may encourage property owners to insure their buildings is the low premium payable for building insurance, according to experts. Adaramola says a property investor who leaves his building without any form of insurance cover is not only putting his investment at risk, but also endangering the lives of innocent tenants.

"A landlord who owns a four-flat home and has tenants all over the place without having a thought about the safety of his property or the tenants is not wise enough. Some of them can go for Construction All Reinsurance, while tenants can undertake household insurance and so on. But the willingness to do it must first of all evolve. Brokers are always ready to guide them and advise them on appropriate options," Adaramola says.

"Home owners are greatly encouraged to embrace insurance because with the case of incessant collapse of buildings, a lot of people have lost so much without any succour from anywhere. If those buildings are insured, the insurance policy will return them to the position where they were before the loss," Ichaba notes.