Dr. Kwame Achampong-Kyei was the special guest of honour at the investiture of the 11th President of the Board of the Ghana Insurers Association (GIA). He delivered a speech on what should be done to facilitate the next stage of growth in Ghana’s Insurance Industry. Here are some excerpts of the speech.
My presence here gives me nostalgic memories of the formative years of GIA and how far the Association has come. It is already 34 years since its formation in 1988, and we must be thankful to God for His bountiful mercies and for bringing the GIA thus far.
I remember vividly the day the founding father of GIA, Nana Duku, approached me in the late 80s and said: “Young man, we have formed our own insurance association and we think you can support us grow it”. I did not hesitate in saying ‘yes’ to his request. I subsequently served GIA as General Secretary for 13 years. I am proud of the major strides we have made as a professional body.
Voice of Insurers and Reinsurers
The GIA has become the authentic voice of all licenced insurance and reinsurance companies in Ghana. This is no mean achievement, and I applaud the efforts of successive administrations who have made GIA such a great brand in the insurance space of Ghana.
Higher Regulatory Standards
Passage of the new Insurance Act, 2021 (Act 1061) which contains a number of forward-looking provisions – including, innovative and compulsory insurances, ‘no premium no cover’ and the requirement to insure risks arising from Ghana with an NIC-Licenced insurer – is significant. These are laudable as they focus on development of the Ghanaian insurance industry; but a lot more must be done, especially in the implementation of these provisions in order to achieve the said objective.
There are already concerns that the gains made by the ‘no premium; no cover policy’ are being eroded by the actions of some industry players, who have been circumventing the policy to the industry’s detriment. The NIC commendably introduced the ‘no premium; no cover’ policy to deal with the scourge of companies underwriting insurance on credit. However, some people within the industry are also of the opinion that a blanket application of the policy does not fully benefit the industry in terms of premium growth.
I strongly entreat the new executives to work hand in hand with the NIC to find ways of amending the policy in light of these concerns without compromising on its ultimate goal.
Review of GOGIP and other Pool Arrangements
It is anticipated that the increase in minimum capital will improve the capacity of insurers to underwrite risks that hitherto they could not.
Let me hasten to say that the improved capacity of insurers as a result of the increase in minimum capital calls for a review of the management of GOGIP and other pool arrangements. Insurance companies, depending on each company’s underwriting capacity, must be allowed to underwrite the businesses that come to the pool before the excess capacity is ceded to foreign reinsurers.
Support for indigenous Insurance/Reinsurance Companies
Indigenous insurance/reinsurance companies play vital roles in development of the insurance industry and the country as a whole. These companies provide employment opportunities for indigenes and foreigners alike. Also, profits made by indigenous companies are kept within the industry and the country for development – besides the amount of taxes they pay.
The growth and success of indigenous companies therefore greatly accrues to the nation’s benefit. It is therefore imperative for the NIC to create and maintain a level playing field for all insurance companies, particularly indigenous companies, to compete fairly by gaining equal access to all segments of the market.
For instance, banks and telecommunications companies have become major distribution channels for insurance companies, and I believe no insurance company wants to be left out of the opportunities provided by these major companies. What pertains presently, however, is that most of these major banks and telecommunication companies exclusively partner one or two insurance companies for distribution of insurance products, leaving other insurance companies outside their distribution channels.
I, therefore, call on the incoming executives and board of the GIA to join hands with the NIC to have these blue-chip companies open their doors for all insurance companies to equally take advantage of their networks and platforms to distribute their products and services. This will not only increase the product offering available on their channels, but also engender innovation.
Strengthening Corporate Governance
The industry’s collective survival is imperative. The insurance industry can sometimes be viewed as a house of cards. The fall of one company could have a domino-effect on most other companies. In this regard, there is a need to strengthen corporate governance to ensure the sustained operation of robust companies within the industry.
Management teams of insurance companies must at all times have an absolute sense of ownership of the companies entrusted to them by the boards. Without an ownership mentality, management may focus mainly on achieving targets by any means necessary so as to be rewarded with bonuses and other incentives – and in the process take on liabilities or create unmitigated risks that could put the companies in serious financial distress.
For example, a management with ownership mentality seeking to entrench good corporate governance would not hastily underwrite risky bonds without regard to reinsurance treaties or recourse to any form of reinsurance arrangement and thus imperil the company.
I also urge boards of the companies to step up their key role of providing leadership to the companies and delivering shareholder value. The boards must ensure that the governance framework includes empowering management, but also sets boundaries for them for the overall benefit of the companies.
Importance of Return on Investments
The importance of after-effects from the increase in minimum capital of insurance and reinsurance companies cannot be overemphasised. Investors and Shareholders will be looking forward to recouping their investments.
In this regard, it is important for all stakeholders collaborate to create the needed congenial environment that will ensure insurance becomes profitable for improved shareholder and investor confidence. They must be assured that insurers are positioned to give them the needed returns on their investments. In this vein, it is necessary for insurance companies to increase the ‘premium pie’ by competing on quality of service and not price alone.
We should endeavour not to shrink the pie by indulging in unethical or unhealthy practices. The canker of premium undercutting, which leads to underwriting losses with little return to our shareholders, must be curbed. GIA’s self-regulatory regime must be strengthened to give them the power to sanction companies that fall foul of collective decisions.
GIA doing more for members
The Association must be seen to be doing more for members than it currently is. There should be relevant training sessions for staff, and the debate on how GIA can help insurance companies in times of financial crises should begin. When members feel that they are getting the necessary support from GIA, they will be obliged to be more dedicated to the Association.
Appeal to NIC
Before I conclude and resume my seat, I want to make a passionate appeal to the NIC; and I am happy the Commissioner himself, Dr. Justice Ofori, is here with us today.
As I stated earlier, unlike banks, the insurance industry can be likened to a house of cards. The companies are precariously balanced on public perceptions, and any major adverse public perception of weaknesses or trouble in the industry – such as the collapse of some companies – could have a domino-effect on the industry. For instance, if the recent banking crisis had hit the insurance industry, I strongly believe that for a long time the industry would have found it hard to stand on its feet.
Thankfully, as an industry, we are not facing any crisis. However, the requirement for recapitalisation may result in some insurance companies, particularly the indigenous ones, either collapsing or being bought by foreign companies.
The winding-up of some affected insurance companies could create a highly negative public perception, and this could adversely affect the industry’s business. On the other hand, if the affected indigenous companies are acquired by foreign companies we could have the case of Ghana’s insurance landscape being dominated by foreign companies – with the attendant consequences of capital flight and profit repatriation, which could seriously affect the economy of Ghana.
I, therefore, wish to appeal that the NIC – instead of giving an ultimatum to companies affected by the minimum capital requirement to recapitalise or have their licences revoked – collaborates with GIA on lobbying government to establish a special purpose investment vehicle that support indigenous insurance companies to recapitalise and remain in business: just as was done for some indigenous banks a few years ago.
In conclusion, I must say that these challenges and others prevailing in the industry have been outlined for the new Executives and Board of GIA to put measures in place to address them for the industry’s overall benefit. The insurance/reinsurance industry is counting on you to bring your experience and expertise to bear on the GIA, so that the industry will be better placed to take advantage of the numerous opportunities available. On this note, I once again congratulate the incoming President and his team and assure them of my fullest support during their tenure.