Nigerian insurance companies to adopt Ghana’s credit guidelines

Insurance companies in Nigeria say they may adopt the credit guidelines of the insurance industry in Ghana.

According to a report by the Daily Independent newspaper of Nigeria, the country’s insurers believe that the Ghana insurance market credit guidelines will help to put an end to the issue of unpaid premium, which is partly responsible for the stunted growth of the industry in Nigeria.

Citing a report of the Accounting Technical Committee (ATC) of the Nigerian Insurers Association (NIA) to members of the association in Lagos, the publication indicated that the committee’s Chairman, Babatunde Daramola, stated that a submission on this issue has already been made to the NIA’s Director General.

“The ATC made a submission to the Director General on the need for a NAICOM (National Insurance Commission) enforced credit guideline similar to what obtains in the Ghanaian market as a solution to the huge outstanding premium carried by insurance companies,” Daramola was quoted as saying.

The report points out that in spite of the fact that section 50(1) of the Insurance Act 2003 of Nigeria stipulates that “The receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium paid in advance,” insurers have continued to grant cover to government agencies and parastatals with the hope that the required premium would be paid later, it says.

The report noted that efforts by the insurance companies to get clients to pay up premium accumulated are never successful and every year, the companies continue to include the unpaid premium in their financial reports.

The following are the credit guidelines for the Ghanaian insurance industry as stated by the National Insurance Commission:

Credit Guidelines

Credit Agreement Forms

Premium Credit granted by Insurance Companies should have a legally enforceable credit agreement form spelling out all the terms and conditions of credit.

Deposit Premium

A deposit equal to 40% of the total premium should be demanded before cover is granted. If after the statutory period of 90 days (three months) the remaining premium is not paid, the Company should go off cover. Until the client pays the 40% deposit, cover should not be granted.

Interest on Credit

Where Credit is granted, an interest element should be worked into the premium. Cash transactions therefore (which will attract no interest) will cost less. It is hoped that this will motivate policy buyers to pay up front.

The interest charged should be 1 % below the 91-day Treasury bill rate.

Personal Lines

Personal lines should be sold on cash basis only. No credit should therefore be granted
on personal lines. Personal lines here are defined as all non-life Insurance Policies purchased by individuals for their own benefit as opposed to corporate entities.


All cheques issued in respect of business transacted through Brokers should be issued in
the name of the Insurance Company.

On presenting the cheque to the Insurance Company, the Broker should attach a debit note for his commission.

By Emmanuel K. Dogbevi

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