Interview: Ivan Avereyireh
What do you see being the major drivers of growth in the insurance sector in the next few years?
IVAN AVEREYIREH: Life insurance will be the major driver of sector growth in the medium term. Life has been the fastest-growing segment of the sector and we believe that this trend will continue. Culturally, plans such as funeral and education policies are very popular. Policies catering to the less affluent segments of the population have grown in popularity, specifically through micro-insurance policies.
However, the GIA will do more lobbying on behalf of insurers to ensure that laws are properly enforced. By enforcing the laws that are already in existence, Ghana would also see a significant surge in property insurance. Ghana’s insurers would benefit greatly from stronger enforcement of mandatory policies.
To what extent is competition in the Ghanaian market dependent on price-cutting?
AVEREYIREH: This aspect of the market has been very detrimental to income and credibility. Over the years, the Ghanaian insurance market has become very competitive. Many firms have tried to remain competitive by offering unsustainable rates.
GIA is currently working closely with the Ministry of Finance to agree on sustainable rates in motor insurance. This discussion will be continued to ensure that all stakeholders can agree on appropriate rates for other sub-sectors to make sure that Ghana’s market can continue to see strong growth.
How has the industry been affected by the “No Premium, No Cover” policy (NPNC)?
AVEREYIREH: The passage of the NPNC policy was certainly in our interest. GIA has worked closely with the National Insurance Commission (NIC) on policy issues. Delinquent payments had a severe impact on firms throughout the sector. Some smaller players were even left unable to pay claims because of a lack of cash flow, attributed to outstanding premiums. The implementation of NPNC created more liquidity among Ghana’s insurance companies. This also creates more robust returns for insurers because there is more capital to put towards investment as well.
Some companies have indicated that they have lost clients since NPNC was implemented. However, GIA’s initial research indicates a strong correlation between the customers who have dropped coverage and those who were previously delinquent. In general, NPNC allows for smoother operations and more consistent income for Ghana’s insurers.
How can the NIC ensure that all commercial buildings have sufficient insurance coverage? AVEREYIREH: Ghana experienced natural disasters in 2015 that have undoubtedly increased awareness and caution. Fires and floods led to catastrophic damage, and this has prompted many policymakers to re-evaluate Ghana’s safety measures and readiness with regard to future disasters. In the past, insurers have not been included in these conversations, and this has led to a lack of risk management and “act of God” responses. Since these disasters, the GIA and NIC have been working on policies to designed to help improve safety in public buildings.
We have found ways to implement these, but it will require collaboration across government agencies. For instance, there is proposed legislation that would make insurance coverage conditional on the receipt of a permit from the Fire Department. It would then be required that the fire permit were visible upon entrance to building. This is a way to ensure that mandatory commercial property insurance is enforced along with other aspects of the fire code. Yet there must be enough personnel to hold property managers accountable for any infractions. Any such programme’s success will be determined by how the regulations are enforced.
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