Insurers nervous about fires

Insurers are keeping a close eye on the increasing incidence of fire outbreaks in the country, which could push them to adjust fire insurance premiums upward, B&FT has gathered.

Already, fire-insurance claims from especially industrial and commercial property operators are beginning to surge following three large disasters in the last four months, including the Melcom and BBC Paints disasters.

This development is becoming an albatross around the neck of the industry as huge fire claims that could wipe-out fire premium income portfolio of companies are beginning to rise. Currently, some insurers are avoiding various businesses of fire and other natural perils because the claims-risk associated with underwriting them is too costly to bear.

In separate interviews with the B&FT, some top-notch practitioners in the insurance industry expressed concern about the high incidence of fire outbreaks in the country, and asked for concerted efforts to stem the tide.

Dr. Gideon Amenyedor, CEO of Vanguard Assurance, explained: “Insurance operates by the principle that the losses of the few will be paid from a pool of funds which is made up of little contributions of many. Therefore, if the unfortunate ones are becoming a lot, it puts pressure on the contributions -- which are the premiums and that have to go up.

“Since the cost of doing business is going up, it becomes worrying because insurers will be forced to increase the premium to enable them to be able to pay claims, and that is a worrying situation.

“It is worrying for both the economy in general in terms of economic waste, and also because insurers directly cough-up money for this waste. And this has an impact on the premium charged because ordinarily, when somebody makes a claim, you look at the timeline that you can recover whatever you paid out.”

Mr. Nii Otinkorang Ankrah, CEO of Donewell Insurance said: “Chances are that you have to adjust the premiums payable upfront. You want to recover as soon as possible because if you pay out a claim and it will take another 20 years to balance your books, the chances are that you will adjust the premiums upward to reflect that particular loss; and so the consumer, which is the client, will be called on to pay more.”

Mr. Godfried Djanie, Managing Director of Millenium Insurance, also added: “As insurance practitioners, the incidence of fire outbreaks in the country is a very serious situation that we all must be concerned about.”

According to the Ghana National Fire Service, it recorded about 265 fire outbreaks in the first two weeks of this year across the country -- which suggests that on the average about 19 fire outbreaks occurred per day, and almost one every hour, within the period.

However, some practitioners, while acknowledging the impact of fire outbreaks on premiums, have played down any imminent increase in the premiums due to the market’s inertia.

The Head, Reinsurance Department of SIC Insurance, Kwei Mensah Ashidam, said there is currently a disconnection between the claims and premium charged in insuring businesses against fire.

He said developments in the market are not reflective of the premiums that insurance companies charge.

“Ideally, a high frequency of fire outbreaks should affect fire insurance premium. Premiums should go up or down depending on developments in the market. That is what is supposed to be done.

“But this is a dull market, and it has not been affected by the claims. There is inertia in the market and nobody is talking about it,” he said.

Insurance practitioners are however looking to exploit opportunities in the fire insurance market, which they consider more stable than motor.

The fire insurance portfolio is seen as better than motor insurance, where accident claims are higher in comparative terms.

With the coming into force of compulsory fire insurance policies for commercial buildings and other allied perils (flood, earthquake and storms), insurance practitioners have called for education on fire insurance to be enhanced -- thus enabling the public to understand the need for taking out fire insurance and other precautionary measures.

The compulsory fire insurance policy is expected to boost the fire insurance portfolio of industry players.

Kwame Ofori, Executive Director of Enterprise Insurance Company, said: “This policy will push people to insure their properties against fire. However, this will depend on how we are able to enforce it. Practitioners must also educate the insured about the benefits of taking fire insurance”.