Between Group Life Insurance Operated by Private Companies and the Employees Compensation Scheme under the Employees Compensation Act 2010

The employees’ compensation scheme under Employees Compensation Act (ECA) provides insurance cover for employees that have accident or are injured in the course of work. The cover extends to dependants of an employee who dies as a result of injury, occupational disease or accident during work. The injury, occupational disease or accident complained of must have happened in the course of work which ordinarily means as a direct result of the employment.

“Employees” covered by the scheme is extensive, it therefore includes not just full time employees, but extends to temporary workers, apprentices, part time workers, domestic servants, casual workers, etc.

The scheme is not a life insurance parse; rather, it is a sort of social security which tends to provide sustenance for employees in the event of occupational hazards which could deprive them of a constant livelihood. The following are therefore broadly covered: disabling injury, accident, occupational disease, mental stress associated to work and hearing impairment.

The Employees Compensation Act makes social insurance with Nigeria Social Insurance Trust Fund (NSITF) compulsory for all employees and employers in the public and private sectors of the Federal Republic of Nigeria. Unfortunately, the Act does not expressly forbid Group Life Insurance operated by private insurance companies.  As a matter of law, employers are under compulsion to also obtain group life insurance for their employees.  Section 4 (5) of the Pension Reforms Act 2014 states in part:

“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 commencement of the cover”.

Each private Insurance company has its procedure for insuring persons. For insurance under ECA, the employer needs to register the employee(s) with the NSITF (registration is free). Thereafter, the employer is obliged to pay 1% of the salary of the registered employee(s) to NISTF Monthly and also submit payment schedule to NSITF Monthly. Contribution by employees for compensation under NSITF scheme is not allowed, employers are therefore not to deduct from the remuneration of their employees to pay for their social insurance.

Analysis of Scale of Compensation

The benefit that may be claimed in case of work place accident depends on the kind of accident/ disability. It includes: monetary compensation, health care benefit, and disability support.

Death situation: Usually, Group life pays a lump sum of equivalent of 52 Months’ salary to the family of a deceased person, but NSITF continues to make Monthly payment of between 30-90% of the total monthly remuneration of the employee as at the date of death the last earned salary. The exact amount payable is contingent on the degree of dependency, the number of dependants, the relationship and age(s) of the dependants.

Where an employee suffers an injury, in the course of his employment, which results in permanent total disability, the Board is to pay him monthly compensation of an amount equal to 90% of his remuneration.

Permanent partial disability: Where an employee suffers a permanent partial disability, compensation ranges from 100% for loss of limbs or both hands and loss of leg or eye by one legged or one eyed employee; to 3% for loss of one phalange. In other words, the percentage to be paid will depend on the degree of the disability. The Payments are made periodically to represent 90% of the difference between remuneration of the employee before and after the injury, Which ever better represents the loss of the Earnings of the injured employee.

Temporary total/partial disability: Payment for temporary total/partial disability is a one off payment. Provided the disability does not last more than 12months.

Additional benefits: In addition to monetary compensation, NSITF may provide for the injured employee any medical, surgical hospital, nursing and other care or treatment, transport, medicines, crutches and apparatus, including artificial members that the Board may consider reasonably necessary at the time of injury and during the disability.

Conclusion:

In as much as the law mandates employers to obtain group life insurance for their employees, the law appears to be flawed because it is a duplication of what NSITF offers. Nevertheless, it remains the law and is binding. So the situation we have at hand is that group life insurance for employees is as compulsory as employees’ compensation scheme, which makes it more expensive for employers to operate.