Larry Jiagge
Larry Kwesi Jiagge, Chief Executive Officer (CEO) of Risk Management and Advisory Services Limited, has called on the National Insurance Commission to address the disturbing low retention capacity of players in the insurance industry with the concomitant low total market retention.
Speaking at Donewell Insurance Company Limited’s 25th Anniversary Symposium on Thursday in Accra, Mr Jiagge said, “The tragedy is that it’s not getting better and until drastic measures are deployed, we would continue on the trend of promoting small and insignificant companies without the capacity to carry risk they pursue at ridiculously unsustainable rates.”
Collective approach
According to him, there should be a market wide strategy involving all sectors of the market to tackle the problem.
“This should include enhancement of capital with a minimum of the equivalence of $10, 000,000.00 from the current $3,500,000.00, stringent application of regulatory measures on premium competition; delisting of companies that cannot meet minimum capital requirements; self regulation by insurer to address myriad of problems in respect of technical capabilities, as well as merging or acquisition of companies.”
Touching on the large number of attached agents in Ghana’s insurance industry, he said there are a total of over 4,531 attached agents, who are the second leg of the intermediary segment of the market compared to Morocco’s 1427 agents.
He said “the capitalization strategy should be long term rather than the periodic spout arrangement we have had in the past. A 10-year timeframe would be enough to get companies to get to a certain defined level of capitalisation. This means, for every x number of years, a company must reach a level prescribed well in advance.
“The market could also be segmented so that companies can choose which level they are structured to participate. This would go with stated and appropriate level of minimum capital requirement.
“A policy on market retention over a period of time in the oil and gas segment must be worked on. Lessons could be learnt from Nigeria.”
Furthermore, he said the low level of capitalization for most companies, small and poorly managed entities, as well as the unbridled and unsustainable competitive regime of the Machiavellian nature has resulted in poor underwriting results.
Seth Aklasi, CEO of Donewell Insurance, in a welcome address, urged all stakeholders to play their role effectively to make the sector an exciting one.
Background
Total assets of the insurance industry in 2017 was GH¢5.4 billion, made up of GH¢2.9 billion in the life sector, GH¢1.9 billion in the non-life sector and GH¢0.6 billion in the reinsurance sector.
Total corporate tax paid by the insurance industry is GH¢50 million, and this does not include VAT and income tax. The industry employs about 12,500 people made up of insurance agents, brokers, insurance and reinsurance staff.
An average of GH¢1.6 million is paid by the life sector as benefit/claims each day to Ghanaians.
Total amount of motor claims incurred in 2017 was GH¢266 million, and this is about an average motor claim of GH¢0.7 million per day.
It’s estimated that the proportion of Ghanaians with insurance cover stands at 30 percent.
Currently, there are 81 broking insurance companies, 28 non-life insurance companies, 24 life insurance companies and three re-insurance companies.
By Samuel Boadi