Business News of 2014-06-17

Broad consultations precede new insurance law

The National Insurance Commission (NIC) is carrying out more consultations on the new insurance law before it is passed onto Cabinet for further transmission to Parliament.

The consultations are to enable the insurance industry regulator to make provisions to cover all emerging areas in the country’s insurance space, including micro insurance and agriculture insurance which are not covered in the current Act.

The new law is expected to be a new instrument rather than an amendment of the existing Insurance Act, 2006 (Act 724) due to the plethora of new provisions required to make the local insurance industry uphold international best practices.

“The bill went to Cabinet, which demanded that we do some more consultations, so the law is going through another consultation before it goes back to Cabinet,” the Head of Supervision at the NIC, Mr Michael Kofi Andoh, told the GRAPHIC BUSINESS in an interview in Accra.

Ghana’s insurance law of 2006, passed as part of a financial-sector reform programme, is quite young but has to be revised to make way for new trends. The revision is expected to make the industry embrace best practices which will boost insurance practice and penetration in the country.

“There are so many things that are changing in the world. The insurance regulatory standards are issued by the International Association of Insurance Supervisors, and they have changed significantly such that making few amendments to the current Act may not be able to contain all the things that we need to ensure compliance with those standards,” Mr Andoh explained.

Some new measures

“The proposed insurance legislation will have comprehensive provisions on business conduct issues such as treating customers fairly, selling appropriate products, providing requisite information to policy holders and prompt claims handling,” the head of Supervision said at a recent presentation to the sales force of Enterprise Life.

The Graphic Business has learnt that some of the new measures are likely to include provisions that will compel insurance companies to keep their promises to, for instance, disclose the terms of the product they sell “at the point of sale and not at the point of claim”. Insurance policy sellers (marketing personnel) will also be expected to disclose their interests.

Also, insurance companies will be required to sell products that are suitable and appropriate to prospects, as well as ensure that the prospect understands what he or she is buying before the sale is closed and all necessary and appropriate documentations are provided, processed and, where necessary, signed.

Benefits

According to the NIC, the new requirements are expected to enhance the face of insurance in the country by fostering public confidence and favourable perception about the industry.

It would also enable the average Ghanaian to realise the true value of insurance, reduce complaints and boost insurance penetration. Risk-based supervision

The NIC is also moving from a compliance-based supervision to a risk-based supervision model. “We want to identify the risks that we have in the regulatory environment and pay attention to that, so that we will ensure that companies that are making promises today will be there tomorrow to honour those promises,” the head of Supervision explained.

For instance, the insurance industry in the country is reeling under indebtedness where policy holders who are given credit never want to pay up. At the close of 2012, premium debts in the industry stood at GH¢130 million, a figure which is expected to be bigger for last year.

Risk-based supervision entails a whole lot of things, including larger capital bases, which need legal backing, for insurance companies, thus grounding the decision to work on a new law rather than amending the old one.

Source: graphic.com
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