Why some insurances are compulsory who enforces them?
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Blessing Chuks Okonta
Insurance is often viewed as optional, especially by individuals and small businesses trying to manage costs. However, in Nigeria, the law makes certain classes of insurance compulsory. These requirements are not arbitrary; they are designed to protect the public, reduce economic shocks and ensure that victims of accidents or disasters are not left without support.
Understanding why insurance is compulsory and who enforces it helps policyholders appreciate its role beyond compliance.
The key reason insurance is compulsory is public interest protection. Some risks affect not just individuals but third parties who have no control over the situation. Compulsory insurance ensures that when loss, injury or damage occurs, compensation is available without delay.
Motor third-party insurance, for example, guarantees that victims of road accidents caused by other drivers can receive compensation for injury, death or property damage. Without this requirement, accident victims would depend entirely on the personal financial capacity of the driver at fault.
Compulsory insurance also helps limit government exposure. When uninsured losses occur, the financial burden often shifts to public funds through emergency healthcare, disaster relief or social welfare programmes. Insurance spreads this risk across the economy rather than leaving taxpayers to absorb it.
In addition, compulsory insurance promotes economic stability and confidence. Covers such as group life insurance for employees, builders’ liability insurance and occupiers’ liability insurance protect workers, tenants and members of the public, while ensuring that businesses can continue operations after unforeseen events.
Compulsory insurance in Nigeria
Under Nigerian law, several insurance policies are mandatory. These include motor third-party insurance, group life insurance for employees, builders’ liability insurance and insurance for public buildings. Each is aimed at protecting lives and property, especially where members of the public are exposed to risk.
Enforcement of compulsory insurance in Nigeria is shared among regulatory and law-enforcement agencies.
The National Insurance Commission (NAICOM) is the statutory regulator of the insurance industry. It supervises insurers, enforces compliance with insurance laws and works with other agencies to combat fake insurance certificates.
Law-enforcement agencies such as the Federal Road Safety Corps (FRSC), the Nigeria Police Force and vehicle licensing authorities play a critical role in enforcing motor insurance requirements. These agencies routinely check for valid insurance policies and apply penalties where violations are found.
For group life insurance, enforcement involves collaboration between NAICOM, employers and other regulatory bodies to ensure that employees are covered in line with the Pension Reform Act and insurance regulations.
Failure to comply with compulsory insurance laws can attract fines, legal sanctions or operational restrictions. More significantly, non-compliance exposes individuals and organisations to substantial financial losses when claims arise.
Compulsory insurance is not intended to burden citizens or businesses. Rather, it is a risk-management tool designed to protect the public, ensure fairness and strengthen financial resilience.
As enforcement improves and awareness grows, compulsory insurance remains a cornerstone of Nigeria’s insurance framework, supporting economic growth and public confidence in the system.
