INTRODUCTION
Insurance premium is the amount on money usually chargeable by insurance companies on individuals and companies for an insurance policy subscription. It is the payment one makes so as to enjoy the protections in the insurance policy he buys. It represents the income of the insurance company. And equally as evidence that there exists a valid contract of indemnity between you and your insurer. Thus failure to pay an insurance premium establishes no valid contract of insurance. The position remains same as failure to pay insurance premium in Nigeria will make no valid contract of insurance.
LEGAL POSITIONS OF INSURANCE PREMIUN IN NIGERIA
There are both Statutory and Judicial Authorities on the place of insurance premium in Nigeria. And each of these positions establishes the importance of premium in the creation of a valid contract of insurance in Nigeria.
STATUTORY PROVISION ON INSURANCE PREMIUM IN NIGERIA
The Nigerian Insurance Act, 2004 provides that the payment and receipt of insurance premium is a condition precedent for the creation of a valid contract on insurance in Nigeria. Therefore, you cannot enjoy an insurance cover if you do not make payment of your insurance premium in advance.
Also, where there exists conditional contract of insurance, the full payment of premium remains a prerequisite before the terms of the insurance contract becomes binding on either party. Similarly, the Nigerian Insurance Act, 2004 does not contemplate the making of payments of premiums in installment.
By the provision of section 50 of the insurance Act, the payment and receipt of an insurance premium shall be a condition precedent to a valid contract of insurance in Nigeria. And there shall be no cover in respect of an insurance risk without payment of premium in advance. The Act equally provides in section 50(2) that the receipt of premium by an insurance broker for an insurance business on behalf of an insurance company shall be a valid receipt of premium for the transaction in question.
In a similar vein, section 51 of the Act provides. “that no insurer shall by itself or as a member of an association of insurers, make a general increase in the minimum rate of premium chargeable with respect to any class of insurance business made compulsory by law , except with the prior approval of the commission”
And consequently, anyone who contravenes the provision of section 51 of the Act commits an offence. And liable on conviction to ten times the amount of premium received in excess by the insurer or N100, 000 whichever is higher.
JUDICIAL DECISIONS ON INSURANCE PREMIUM IN NIGERIA
The Nigerian Courts have in their various judicial decisions confirm the overwhelming importance of the payment of an insurance premium for a valid contract of insurance to come into existence. We shall analyze some of these judicial decisions here.
CORPORATE IDEAL INSURANCE LTD VS. AJAOKUTA STEEL CO. LTD (2014) 7 NWLR (pt.1405)p. 165
In this case, the Appellant as the Plaintiff at the lower court ( Federal High Court sitting in Abuja) vide writ of summons. And Statement of Claims dated 18th December, 2000. Prayed the Court for a declaration that they are entitled to the sum of N226,000,000,00 specifically appropriated, set aside and earmarked for payment to them as arrears of insurance premium in accordance with the Provisions of the Appropriation Act, 2000, against the Respondents. And secondly for some other injunctive reliefs and damages. The summary of the facts of the case is as follows:
THE FACTS OF THE CASE
That on 17th January, 1996. The first Respondent requested the Appellant to provide an insurance cover for their equipment/machineries for the insurance period from year 1996 to 2000. By the understanding of the prospective insurance parties, the payment of the insurance premium will not be immediate. In other words, the “no premium, no cover” provision in the Insurance Act will not apply to their insurance contract. They were of the agreement that their insurance contract will be binding as if there was full payment of premium.
THE DECISION OF THE COURT
However, the court in her judgment declared the contract illegal. And equally states that a contract which in itself seeks to breach the provisions of a statute is illegal. And that none of the parties can benefit from such illegality. That the contract of insurance which arises in contravention of section 50(1) of the Insurance Act, 1997, which is same with section 50 of Insurance Act,2004 is illegal. And unenforceable.
Section 50(1) of the insurance act states: “The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk unless the premium is paid in advance”. The court held that the provisions of the section 50(1)clearly forbids entering into any insurance contract without payment of the premium in advance. The court went further to state that the above provision is mandatory, imposes a duty and a word of command. It cited the case of ONOCHIE VS. ODOGWU (2006)6 NWLR (pt. 975)65. It stated further that the implication was that the parties were bound to obey the clear provisions of section 50(1) of the insurance Act 1997. And that there is no any discretion from any of the parties.
I G I CO. LTD VS. ADOGU (2010) 1 NWLR (pt. 117)p. 337. (whether section 50 (1) of the insurance act 2004 contemplates payment of insurance premium in installment)
The brief fact of this case is that the Respondent at the trial entered into a contract of insurance with the Appellant for the coverage of Mercedes E240 against the incidence of loss. The amount of cover is for Seven Million, Eight Hundred Thousand Naira (N7, 800, 000.00) only. The agreement for premium was at Five Hundred AND Twenty Thousand Naira only (N520, 000, 00). However, the respondent made part payment of Two Hundred and Twenty Thousand Naira (N220, 000). And therefore leaving a Balance of Three Hundred Thousand Naira (N300, 000) only.
Unfortunately, the insured car was robbed at gun point on the 15th of February, 2003. But two days after the robbery, the Respondent paid a balance of Three Hundred Thousand Naira to the Appellant insurer. And thereafter filed for claims of indemnity against the Appellant for indemnity against the loss of her car.
The insurance company as Appellants’ contention is that it commenced the process to pay the claim but discovered some irregularities as to the engine and chassis number of the said vehicle and stopped. The irregularity was that the vehicle lacks registration.
The Respondent contention was that the Appellant directed her to pay the balance of her premium when she approached them. She made the payment but the claims were not paid. Hence she applied to the court for the appointment of an Arbitrator. The arbitral award against the appellant was N6,318,000,00).
THE DECISION OF THE APPELLATE COURT
Being not comfortable, the Appellants set an appeal to set aside the arbitral award. But it was refused by the trial court. The appellants appealed again to the Court of Appeal. And contended among other things. whether in the face of clear part payment of the premium in contradiction with section 50 of the insurance decree 1997, the trial Court erred in law affirming the Arbitral Award erroneously made by the Arbitrator.
In its judgment, the court confirmed that full payment of an insurance premium is compulsory. And held that there was no valid insurance contract between the parties. The reason for the decision is that there is no full payment of insurance premium in advance.
