Insurance Sector in Developmental Crises
The Insurance Sector is drastically faced with challenges hindering it from progressing and hence retarding its development.
The National Insurance Company has declared that there are some challenges confronting the industry such as slow use of technology, adverse selection, false claims, late payment of claims, the depreciation of the cedi, and price under- cutting, low penetration of insurance products and services, low profitability, low capitalization, poor risk management corporate governance and low deployment of information communication technology (ICT) especially in the insurance industry.
According to the NIC, Late payment of claims was captured in their previous report.
‘’though the NIC still views it as a problem in the industry there had been improvements on this front from July 2015 even though it periodically claim payment guidelines in the dailies’’.
The NIC has indicated that the low penetration rate is a big problem for the industry and the economy as a whole.
Most companies have complied with the minimum capital requirement of GHS 15,000,000 but the increase in the minimum capital requirement did not lead to mergers and acquisitions as it anticipated “thus there are still lot of small and inefficient firms in the insurance market’’.
The NIC believes that most of the insurance companies are under resource.
‘Most of the insurance companies are still small and do not have the resources to do the things that they are required to do.
It further stated that some of the insurance companies are not profitable and are struggling to break-even.
‘’it is surprising that for an industry that exist to help its client manage risk ; its risk management culture has been identified as unsatisfactory by the regulator’’
The NIC indicated that strangely good governance was not a common feature in the insurance industry. The NIC further explained that lack of adequate infrastructure leads to poor reporting by the insurance company.
The report has it that although insurance activities seem to have been concentrated in 7 firms, the insurance industry has seen an influx of foreign players and a revision of the risk-based supervision framework which served as a replacement for the compliance.
The NIC has outlined some recommendations based on the review of the industry to facilitate the work of the insurance industry.
- We need more diversity on the board of insurance companies.one of the areas that we have identified is making room for female board members in the board room. In addition, females should be engaged in sub-committees of the board. Further we realized that the average board was old. Thus, the injunction of younger board members should increase the diversity of the board in terms of age.
- The boards of insurance company should consider meeting at least six times in a year.
- We recommend that the board put in place formal succession plans to assure shareholders and other stakeholders of the continued growth and survival of their firms.
- Boards should institute formal policies on the length of service or tenure of directors.
- We need concrete empirical evidence that examines whether or not the tenure of CEOs and directors on company’s board has any implications for performance.
- We recommend the expeditious constitution of the boards of insurance companies with government ownership interest and the NIC after our general elections. this will facilitate the business of these institutions.
- We encourage parliament to work expeditiously to pass the new insurance bill into an Act. This will provide full legal backing for the reform programs that the NIC is undertaking.