Bad Faith by Delay: Proving Insurer Misconduct and Remedies for Unreasonable Delay in Claims Settlement Under NIIRA 2025

Insurance contracts are founded on the principle of uberrimae fidei, or utmost good faith, which imposes reciprocal duties of honesty and transparency on both the insurer and the insured. Insurer bad faith may arise through unreasonable delay in settling claims, unjustified denial, inadequate investigation, low settlement offers and failure to defend or settle a claim where reasonable to do so. This article focuses specifically on unreasonable delay in claims settlement and the changes introduced by the Nigerian Insurance Industry Reform Act 2025.

Under the previous Insurance Act 2003, insurers were required to settle accepted claims within 90 days of the issuance of a discharge voucher. Failure to settle or provide a written denial within that period constituted an offence, but the framework did not provide the insured with automatic compensation for the delay itself.

NIIRA 2025 significantly changes this framework. Admitted claims, except special risks, must now be settled within 60 days of notification. Delayed claims may attract monthly compound interest at prevailing bank rates, while statutory compensation is expressly available for unreasonable delay. NAICOM also retains and strengthens its ability to intervene through an insurer’s statutory deposit and may impose administrative fines for non compliance.

The article also considers an important distinction in the new regime. NIIRA 2025 does not create a separate tort of insurance bad faith or lower the general threshold for establishing insurer misconduct. Rather, where a claim has already been admitted, the central questions become whether the statutory 60 day period has elapsed and what financial consequences follow. Where the dispute concerns whether a claim should have been admitted at all, the claimant must still establish that the denial was made in bad faith.

For delay based claims, proof is largely documentary. A claimant must establish that the claim was admitted or ought to have been treated as admitted, identify the date of notification and show that 60 days elapsed without payment or a compliant denial notice.

Available remedies include statutory interest on delayed claims, court or tribunal awarded compensation or damages for unreasonable delay, and access in appropriate circumstances to an insurer’s statutory deposit and the Insurance Policyholders Protection Fund.

Read the full article for further insight into claims settlement delays, proof of insurer misconduct and the remedies available under NIIRA 2025.