Dr. Justice Yaw Ofori, Commissioner of Insurance has given a strong indication that the National Insurance Commission (NIC) will revoke licenses of insurance companies that fail to recapitalise by 31st December this year.

Addressing the media, Dr. Justice noted that the companies have less than six months to meet the new requirement of GH¢50 million which is expected to put them in good standing to be able to underwrite big ticket risks.

Meanwhile, Dr. Justice Yaw Ofori believes that an appreciable number of insurance companies would be able to meet the new requirement following a final assessment of their books.

“Most of them have brought in their work plan on how they are going to actually achieve the ¢50 million requirement. So it’s in progress. By the end of the third quarter, we will actually have a clear figure of those companies that might be able to meet the requirement”.

In terms of assessment of the books of insurers, Dr. Ofori said “what I will say is that most of them [insurers] are doing all they can to improve their capital requirement. Definitely some will face challenges, but majority of them are doing whatever they can to meet the minimum capital requirement”.

Moreover, he reiterated that “after 31st December, if you do not meet the minimum capital requirement, then you cannot operate.”

Recapitalization Date Extended

The insurance firms were given up till January 1st, 2022 to boost their capital base.

Initially, the deadline was expected to be the end of June 2021, but the insurers complained that the coronavirus pandemic had disrupted their plans. This made the insurance regulator to accordingly grant the firms an extension which is expected to last till the end of 2021.

How Fraudulent Claims affect Premiums

Meanwhile, Dr. Justice Ofori commenting on fraudulent claims stated that about 25% of all insurance claims made in the country are fraudulent.

“Basically worldwide, of all claims reported, 40% are fraudulent. That is one of the reasons why insurance claims need a lot of investigation. It also affects the premium people pay, because so far as there are leakages it results in a high premium for consumers worldwide. I don’t have the specifics, but in Ghana, we should be looking at about 25% fraudulent claims. It could be inflating claims, staging claims, and sometimes people staging their death to make a life claim.”

Insurance fraud may fall into different categories, from individuals committing fraud against consumers to individuals committing fraud against insurance companies. Non-medical insurance fraud is estimated at over $40 billion dollars per year.

Dr. Justice Ofori noted that insurance fraud does not only inflict extra costs on insurance companies, but it financially impacts ordinary consumers, as they are forced to pay higher premiums at the end of the day.

According to the 2019 Annual Report of the National Insurance Commission (NIC) average daily claims incurred by Non-Life Insurers in Ghana was GHc 1.4 million.