Revolutionizing The Insurance Market In Ghana.

Revolutionizing The Insurance Market In Ghana.

The Insurance Act, 2021 (Act 1061) has repealed the Insurance Act, 2006 (Act 724). This enactment now serves as the legal instrument for the regulation and supervision of the insurance market.[1] The Act has been welcomed as timely due to the current state of the industry, the impact of COVID-19 and the introduction of the African Continental Free Trade Agreement (AfCFTA).

Major changes have been made by virtue of the new law which reflect the modernisation of the insurance market. A move which will enhance the image of Ghana’s insurance industry and increase insurance penetration in the country.

The introduction of two types of compulsory insurance; Public Liability Insurance and Professional Indemnity Insurance by Act 1061 is revolutionary.  Prior to this enactment, only two compulsory insurances; the motor insurance and fire-fighting insurance.

The Public Liability Insurance[2] allows people to be insured against liability to other persons for bodily injury or property damage that arise out of or in connection with the business, activity or operations of the insured person. The coverage includes the legal and other costs connected with the incident. The insurance is in respect of commercial buildings such as office spaces, banks, shopping malls, factories and hospitals.[3]

The Professional Indemnity Insurance is made for professionals such as accountants, medical doctors, insurance practitioners, insolvency practitioners, lawyers, financial and investment analysts.[4] Employers of the aforementioned professionals are required to insure and maintain this insurance with a licensed insurance company, for the professionals.[5]

The objective of this type of insurance is to indemnify the insured professional against his or her liability for loss or damage arising from a negligent act, error or omission, breach of duty of care in connection with his or her instructions, dishonesty or loss and theft of documents, caused to another person or client. It also covers the legal and other costs in defending the claim or investigating and settling the claim.[6]

Other features of the New Act 1061 aimed at revamping the insurance industry are the establishment of the Insurance Education Fund and the Agriculture Insurance Fund[7]. The Insurance Education Fund is purposed to provide financial support to the Ghana Insurance College for training persons working in the insurance industry and for educating the public on insurance matters.[8] The Agriculture Insurance Fund is geared towards providing financial resources for subsidizing agricultural insurance premiums, training agricultural extension officers, investing in technology to educate farmers on agricultural insurance and to build capacity of state institutions to provide consistent data.[9]

The Act also gives the Insurance Commission the discretion to specify minimum premium rates and maximum levels of commission or other remunerations for specified classes of insurance business or contracts.[10] This provision will, in part, reduce under-cutting and provide realistic premiums to insurers, which will reduce the expense ratios of insurers and enhance profitability.

Act 1061 has specific provisions on innovative insurance to support persons that are interested in breaking new grounds in technology and innovation within the insurance space[11]. The Insurance Commission shall grant such an innovative license to an insurer where the Commission is satisfied upon application by the insurer, that the insurer is capable of using a new or different technological or innovative measure to carry on a proposed innovative insurance business or to provide products or services. The applicant must prove that the customers shall be adequately protected.

In summary, the new Insurance Act injects a level of confidence into the future prospects of the insurance industry. However, all industry players bear the responsibility of ensuring that this law is successfully implemented.

[1] Insurance Act 2021 (Act 1061), Long Title

[2] Ibid, Section 215

[3][3] Ibid, Second Schedule

[4] Act 1061, Second Schedule

[5] Ibid, Section 216

[6] Ibid, Section 217

[7] Ibid, Sections 240 & 246

[8] Ibid, Section 241

[9] Ibid, Section 246

[10] Ibid, Section 256

[11] Ibid, Sections 211-213

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