NIC to sanitise insurance industry

The Commissioner of the National Insurance Commission (NIC), Lydia Bawa, has pledged to address challenges in the insurance industry to enhance public confidence in the industry.

Miss Bawa noted that prompt claims payment and premium debtors are some of the principal challenges that threaten the survival of the insurance sector.

“Claims payment has been a major challenge in the Ghana insurance market. Insurance companies are in the business to pay claims, and therefore companies should mobilise funds to pay claims even before payment of salaries to their employees.

“Another challenge that needs to be addressed as early as possible is premium debtors. We need to work together as an industry to deal with the challenge of premium debtors. I am therefore looking forward to the support of all players for the adoption of a “no premium, no cover” policy, to ensure the survival and stability of the Ghana Insurance Industry,” she said.

Currently, there are 43 insurance companies in the country with a combined penetration rate estimated at 1.5% of a population of about 26 million.

Industry players believe the difficulties in accessing claims when they are fall due has dampened public confidence in the industry. Ms Bawa said the Commission has recognised that absolute confidence in the insurance industry is the only way forward for the industry’s survival and stability.

“On our part, we will continue to work to build a credible image for the industry.

“There are a lot of areas that we need to work on to improve the image of our industry, thereby ensuring growth and a substantial contribution to the economic development of our country.

“The NIC, with the support of the sector Minster, has agreed on the need to enhance the finance industry’s capital base. There is also need to introduce the new solvency requirements in order to protect the interest of policyholders,” she added.

The minimum capital required to operate insurance business in the country is now GH¢2million and the NIC is hoping to increase this to GH¢10million.

It is expected that the imminent increase in capitalisation requirement will force some insurers into mergers and acquisitions as the regulator seeks to ensure stability in the industry and also strengthen the financial muscles of the insurance companies to undertake large underwriting businesses.

A World Bank report in 2012 titled “De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services” mentioned that insurance companies in Ghana and other countries within the West African Monetary Zone (WAMZ) are too small and need to recapitalise in order to underwrite major business.

It added that, in the WAMZ region, the regional financial market remains fragmented by lack of an official cross-border payments system; by differences in the regulatory framework for financial institutions between countries in the region; and the absence of credit-sharing information across borders.

It said regulations and supervisory practices for the insurance sector are far from uniform across the region -- which increases the cost of operating regionally and undermines the ability of supervisory bodies to assess the risks posed by cross-border activities of the institutions that they supervise.