Low Insurance Premiums Threatens Brokers

There is an intensified rate of premium undercutting by insurance companies in Ghana and this is threatening the existence of insurance brokerage firms in the country, the Ghana Insurance Brokers Association (GIBA) has stated.

When premiums are too low, insurance brokers, who serve as professional intermediaries between clients and insurance companies, will have their commissions thinned out and this could put them out of business, GIBA members noted worryingly at the launch of the association’s 25th anniversary in Accra last week.

CITY & BUSINESS GUIDE gathered that in their bid to attract more customers, the over 30 insurance companies in Ghana constantly cut the cost of their premiums.

According to the President of GIBA, Rev Asante Marfo-Ahenkora, this is a time-bomb because the lower the rate of premium, the more difficult it would be for insurance companies to honour claims from customers.

The association is seeking ways of improving its public presence through educational programmes and promotions because it believes that a vibrant insurance brokerage industry is what Ghana requires currently for customers to benefit from the numerous opportunities of insurance.

Mr. Marfo-Ahenkora conceded that the brokerage industry is still at its infancy, stressing that they are more concerned about the ability of the Ghanaian industry to honour claims from clients.

“Premium undercutting is a concern in the whole industry. The management is quite complex because we are looking at a balance, a balance in finding out what is the right premium,” Marfo-Ahenkora told the paper.

“As professionals, what we do when we realize that certain premiums or certain rates offered on the market are way below, we have had instances where we had to intervene and tell our insurers that this is too low so increase it. It may not serve short-term interest of the client, but it will serve the long-term interest because if you have adequate premiums being collected, then when the time for claim payment comes, we as brokers would not have to go through too much hassle,” stated the GIBA boss.

According to him, “Because we feel the pulse of the whole market, we have a bird’s eye view of exactly what happens”.

The brokerage industry, which is under threat from this premium price war, consists of 15 duly registered companies who handle insurance for individuals, associations, Non-Governmental Organisations (NGOs) and enterprises (big and small).

According to Marfo-Ahenkora, GIBA’s clients are those who seek to improve their bottom line by cutting down on risks.

“They therefore require sound advice and innovative ways from their risk managers.”