An industry discussion has commenced between players in the insurance sector and the regulator – the National Insurance Commission (NIC) – for a possible extension of the GH¢50 million new minimum capital requirement set to take effect in June next year.
The insurers, under the auspices of the Insurance Brokers Association of Ghana (IBAG) and Ghana Insurance Association (GIA) are requesting an extension of the minimum recapitalization as a result of the Coronavirus Pandemic that has severely impacted on all business activities across the globe.
Indeed the insurance sector has been adversely affected by the pandemic. Unsurprisingly, one of the outcomes of COVID-19 has been an enormous increase in customers making claims on their insurers, particularly with regards to business interruption policies .
An assessment done by an international accounting firm, KPMG states that given the overall impacts to the economies in various jurisdictions around the world, many insurers have adjusted the premiums payment terms around timing of payment, late fees and cancellation for non-payment as well as even partial return of premiums for reduced use.
In fact, insurers have significantly increased their communication with customers by showing a great deal of proactive customer-driven support. In some countries, insurers offered rebates on motor insurance as a result of reduced levels of driving during lockdown.
Insurers in the United Kingdom for instance, offered free motor cover and enhanced home cover for National Health Service (NHS) workers, as well as extending business cover to provide coverage for employees working from home.
“While these are all positive actions, they also point to a problem: some insurance products have begun to feel out of step with the reality confronting customers, and thus with their needs”, KPMG says.
The firm insists that since the sector involves highly complex business involving multiple processes such as administering existing policies; pricing of new business; selling new business; renewal of policies; addressing customer inquiries; and the claims process, it is no surprise, therefore, that the COVID-19 situation poses a wide-ranging series of challenges for insurers to maintain their operations as normal ways of working become severely disrupted.
Here in Ghana, some industry players are already urging the insurance regulator to consider the request of insurers and extend the new minimum capital requirement date to enable insurers re-adjust to the ongoing changes in the market before having to face up to the already formidable challenges of complying with the new minimum capital requirements.
Despite the impact being felt on all sectors of the economy, KPMG notes that the COVID-19 pandemic puts insurers on the fast-track to technology adoption in the wake of the disease.
The new minimum capital requirement with a 230 percent increase from the initial GH¢15 million to GH¢50 million for both life and non-life (general) insurers created fierce controversy among industry operators following its announcement.