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| Mahama |
Chuks Udo
Okonta
The Ghana
Insurers Association (GIA) and Ghana Insurance Brokers Association (GIBA) have
called on the Federal Government to immediately reverse its directive which restricts
the purchase of insurance by all Ministries, Departments and Agencies (MDAs)
solely from insurance companies wholly or partially owned by government.
The underwriters
and brokers in a letter made available to Inspenonline,
entitled: Re: Directive from Office of the President on Purchase and Renewal of
Insurance Cover by Ministries, Departments and Agencies (MDAs), written to
President John Mahama, said the directive negates the insurance law and is
inimical to the growth and development of the industry in the country.
The letter
reads: “The attention of the Ghana Insurers Association (GIA) and the Ghana
Insurance Brokers Association (GIBA) have been drawn to a directive from your
august office Ref. Number OPS/82/2 Vol. 1/13/2469 dated December 9, 2013 and
signed by Dr. Raymond A. Atuguba, the Executive Secretary to the President. The
directive titled “Purchase and Renewal of Insurance Cover in the Course of
Government Business” restricts the purchase of insurance by all Ministries,
Departments and Agencies (MDAs) solely from insurance companies wholly or
partially owned by government.
“It would
be recalled that this directive is not different from Section 64 of Insurance
Law 1989, PNDCL 227, which required all Government agencies, statutory bodies
or corporations in which Government owns more than 50% proprietary interest and
all interests or properties of the Government to be insured with the State
Insurance Corporation.
“As that
Law was found to be inconsistent with Government policy on the private sector,
and Government’s obligations under international treaties, it was repealed
together with Section 65 with the enactment of the Insurance Act, 2006, Act
724. The monopoly enjoyed by the State Insurance Corporation was therefore
removed and conditions created for a level playing field for all market
players. This engendered a vibrant and competitive insurance market to the
benefit of the insuring public and government.”
Continuing
the operators said: “It was in the same spirit that Parliament repealed the
Ghana Reinsurance Organisation Law, 1984 (PNDCL 79) and the Ghana Reinsurance
Organisation (Amendment) Law 1987 (PNDC Law 169) and the subsequent removal of
the 20 percent compulsory legal cession to Ghana Reinsurance Company Limited
which came into effect in 2009 after a two-year moratorium had expired in
December 2008. This removed the monopoly of the Ghana Reinsurance Company in the
reinsurance market.
“It is our
respectful opinion that the current directive is completely at variance with
the positive efforts that your Government is making to promote the private
sector as the engine of growth. A directive which seeks to discriminate against
the insurance industry, particularly at the time that the National Insurance
Commission seeks to increase the minimum capital of insurers to the cedi
equivalent of US$5million, it also sends a wrong signal to the investment
community.
We have 48
licensed insurance/reinsurance companies in Ghana and only two (2), SIC
Insurance Company Ghana Limited and SIC Life Insurance Company Limited are
direct insurers in which government has interest and also Ghana Reinsurance
Company Limited. SIC Insurance Company Limited is a public listed company whose
shares are held by both local and foreign investors, with Government owning
about 40 per cent shares.”
They noted
that privately owned insurance and broking companies make significant
contribution to the economy, as the industry employs 4,000 permanent staff and
over 5,000 persons as insurance sales agents, adding that private insurance
companies make significant contributions to the national treasury through the
payment of various taxes and that it wholly and exclusively funds the
operations of the National Insurance Commission through the payment of fees and
levies.
The
operators said the industry collectively also makes significant contributions
to the National Road Safety Commission, the National Health Insurance
Authority, the Motor Insurance Compensation Fund and the Fire Fund, stressing
that private insurance companies also undertake significant corporate social
responsibilities that benefit marginalized and deprived segments of our
population.
“This
discriminatory directive which seeks to preclude private insurance companies from
participating in the insurance business of government, would lead to
retrenchment of staff and loss of income earning opportunities for the large
number of citizens who sell insurance as agents.
“We are at
a loss as to who the real beneficiaries of this directive would be in the long
run. We are in no doubt that the directive would not inure to the benefit of
the nation and would only serve the interest of a few individuals.
“We call
for the immediate reversal of this directive in the interest of the growth and
development of the insurance industry in Ghana.”
Since the
directive was issued, there have been confusion among stakeholders in the
insurance industry and the public as it was considered a setback to efforts to
reposition the industry.
Ghanaian insurance industry will by January 2, 2014 kick-starts the implementation of no premium no cover
policy, which would compel insurance consumers to pay their premium in advance.
The nation’s Commissioner for Insurance, Lydia Bawa, said the reform will halt
the menace of granting insurance cover on credit which has retarded the growth
of the industry and makes it difficult for most operators to meet their claims responsibilities.
“The Problem we have in Ghana is
about payment of claims. Insurance companies are not paying claims, and that is
giving us a bad name. The insurers are
not paying claims because they are underwriting on credit. So, they are not
able to generate enough premiums, invest and make claims.
“I have learnt from the Nigerian Insurance Industry experience. From discussion with Nigerian Insurance
Commissioner, Fola Daniel, I got to know that he introduced no premium no
cover, to halt the sales of insurance on credit and its is working well for the
industry.
“With the policy, premiums are paid up front, underwriters collect their
premiums, invest and pay claims and everybody is happy. So, I have decided to
implement this effect from January 2, 2014. I have government’s support to go
ahead with it. At this stage, I have writing to the industry players, for their
comments, and after that, I would go ahead with the policy,” She said.
She noted that the reforms embarked by the commission would restore the
confidence on insurance that has been lost by policyholders and the public.
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