Insurance companies that engage in price undercutting to be sanctioned
Inspectors from the Ghana Insurance Association have been deployed to report companies engaged in premium undercutting for appropriate sanctions to be applied to the offenders, an official from the National Insurance Commission (NIC) disclosed on Thursday.
Mrs. Nyamikeh Kyiamah, Acting Commissioner of NIC, decried the unhealthy practice of price undercutting that bedevilled the industry but expressed commitment towards utilizing resources to ensure the practice ceased.
She was speaking to journalists after the inauguration of NSIA Ghana Insurance Company Limited (NGICL) in Accra.
NGICL is an international group, currently operating in 10 countries with Ghana being the first Anglophone country.
Mrs. Kyiamah observed that some companies operating in the non-Life Insurance sector were guilty of huge premium debt, and expressed the hope the new guidelines from the Premium Credit Committee set up by the Commission, would address the problem.
“The ratio of outstanding premiums to gross premiums was 43 per cent in 2008, as against 34 per cent in 2007. The figure for 2009 from all indications could even be worse,” she said adding that the effect of the premium debt made it difficult for companies to significantly invest with a resulting negative implication on the company’s solvency position.
Mrs. Kyiamah said the NIC had put in place measures to improve business operations in the industry, and cited the enhancement of the minimum capital requirement to ensure that market participants have the financial power to assume risks in areas such as oil and gas and the inability and risks associated with the industry, as an example.
Issues of premium debts with clear guidelines to improve collection, cash and carry principles on motor and fire insurance as well as the compulsory insurance for public buildings were other measures she mentioned.
Dr Kwabena Duffuor, Finance Minister, in a speech read on his behalf, observed that interest on government securities had witnessed a significant decline in the last few months and called on lending institutions to take a clue from the development to lower their interest rates.
He said the emergence of financial institutions including insurance companies from the sub-region and other parts of the continent in Ghana, attested to government’s policy of using foreign investment as a tool for strengthening sub-regional integration.
“Government has put in place several strategies aimed at encouraging more efficient financial institutions and supporting their efforts as part of the on-going financial sector reform to deepen the scope and scale of financial services and the payment system in the economy,” he said.
Dr Duffuor urged the NIC to step up efforts to increase minimum capital requirements in the insurance sector.
He urged the management of NGICL to set high standards in their business operations and pay attention to the statutory requirements in the country for mutual benefit to themselves and the Ghanaian economy.