NSIA Insurance calls for an end to premium undercutting among insurers

The General Manager in charge of operations at NSIA Ghana Insurance Limited, Mr. Samuel Adoteye-Asare has called on the National Insurance Commission (NIC) to step up its monitoring mechanism to ensure that insurers that underprice risk are punished.

According to Mr. Adoteye- Asare, some insurance companies in the country are still underpricing risks as part of a grand scheme to gain customers and market share - to the detriment of their counterparts.

After a closer look at the financial results of companies, NSIA’s operations General Manager said it was obvious that companies were making profit from investment activities and not on the core activity, a development that can be traced to the amount of money companies charge the insuring public for the various insurance policies in the country.

Premium underpricing, which is an age-old challenge in the local insurance business, means that lower premiums prices are offered for comparatively higher risks. While this may help attract more customers to a company, it means that that insurer will be found wanting when claim payment for that underpriced risk arises.


Out of the 26 companies operating in the general insurance category, Mr. Adoteye-Asare said data from the industry regulator - the NIC showed that only five made profit across board – on investment incomes and underwriting of risks.

The remaining 20 only gained in investment income but heavily made loses in claims and management fees – the two areas that collectively make up the core business of every insurance company and improve profitability.

“If you are in the business of insurance and your underwriting activity is posting a technical loss, then there is something technically wrong. As a risk manager, it means you are not conducting your business on profitability,” he said, referring to the continuous undercutting of premiums by some insurers in the country.

He added that one of the reasons some insurers record non-profitability in the insurance sector is as result of poor risk management and pricing.

To ensure profitability, the General Manager of NSIA insurance recommends an intensive implementation of increment in the minimum capital of insurance companies will help to force mergers and acquisitions within the industry.

On how the company fared despite the challenges in the sector, Mr. Adotey- Asare said NSIA’s performance was subdued by series of write-offs in 2015, following the twin disaster of fire and floods, which cost the entire industry some GHC322 million in claims.

“But we have since turned the corner. As I speak, our first half results shows that we are both technically profitable and financially profitable and it makes our overall profitability very solid,” he added.

He commended the NIC for introducing risk-based supervision mechanism, which will in the long run ensure efficiency in the industry. He, however, advised other companies in the sector to adhere to the commission’s policies.

“If we all properly rollout what the commission has put in place, it will help us in a long way, especially when it comes to the risk management function of the various companies,” he said.