Interview: Justice Yaw Ofori
What has driven the increase in capital requirements, and how will it impact the market?
JUSTICE YAW OFORI: In line with contributing more meaningfully towards the government’s agenda of developing the economy and providing more socio-economic support, the NIC decided to review the insurance market, and we realised that there was a need to revise the minimum capital requirements upwards. Risk is core to insurance, and it is key that insurance companies are solvent enough to protect against it.
With the upwards revision of the minimum capital requirements, insurance companies will have the capacity to absorb more risk, as well as invest in technology and training of their personnel. Before the first minimum capital requirements were introduced in 2014, the economy was not as large, and sectors such as oil and gas were underdeveloped. We expect that the capital requirements increase will result in consolidation, but the NIC is not looking to drive this. What companies decide to do will remain a corporate decision, with many options available to shareholders.
How can greater insurance penetration rates be achieved as a result of recent initiatives?
OFORI: We are trying to incorporate our goal of having more forms of compulsory insurance into the new insurance act, such as worker compensation and group life insurance. These new mandatory forms of insurance are going to provide some protection and will help increase penetration. However, penetration is not the only criterion we are trying to improve. There was a time when insurance penetration as a percentage of GDP was much higher than it currently is – at 5% – but the uptake was low. This is an imperfect point of reference because penetration as a percentage of GDP is affected by growth in other sectors. It is more important to have wider coverage, and we believe that 70% of Ghanaians should be covered by some type of insurance. The capital requirements increase, which will increase the solvency of insurance stakeholders, should lead to better claims investigations and more rapid payouts, ultimately improving coverage by building confidence in insurance. The NIC has also increased insurance education in 2019 through the Ghana Insurance College, with a nationwide education programme. High school and college graduates who are unemployed across all regions are being trained to enter the labour pool as insurance agents. We are also looking at introducing insurance education at secondary school level, in order to allow students to educate their parents on the need to buy insurance.
In which ways do you anticipate emerging technologies to affect the insurance industry?
OFORI: Technology is something you cannot run away from; those who abstain from adopting the latest innovations will find themselves lagging behind. At the NIC we are working on building a central database that will collect data from all insured motor vehicles on the market. The Driver and Vehicle Licensing Authority’s statistics show that 2.3m vehicles were licensed in 2018, but 800,000 – more than one-third – of those vehicles had no insurance. With the aid of this database underwriting could be done online, and some of the information obtained can be accessed by the public. This will ensure that people are able to confirm insurance validity prior to boarding a commercial vehicle. We are working with the police to ensure enforcement, which we also expect to be driven naturally when people are able to verify the authenticity of their vehicles. We are also working with stakeholders of the Ghana Shippers’ Authority, the Ghana Revenue Authority and Customs agencies to ensure the enforcement of compulsory marine insurance on goods coming into the country. On the insurers’ side we expect digitalisation to spread rapidly, and we anticipate processes such as micro-insurance to spread with the help of new technologies to cut down on administrative expenses.
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