> Address The Issue Of Price Undercutting In The Insurance Industry
The Chairman of Quality Insurance Company (QIC) Ltd, Rev Msgr Anthony Boahen Kyereme, has appealed to the National Insurance Commission (NIC) to tackle head-on the problem of price undercutting that refuses to go away from the insurance industry.
Rev Kyereme said the widespread problem of quoting premiums below the feasible market rates for risk was seriously affecting the competitive environment of insurance and giving it an ugly face.
“It is my humble plea to the NIC to tackle the nefarious practice of premium undercutting which is giving the competitive environment an ugly face,” he said at the inauguration of a new office complex for QIC, one of the fastest growing insurance companies in the country which last year grew its premium income by 39 per cent over the previous year's.
In view of its fast climb up the ladder, the company moved from the Peter's House at Adabraka, where it started operations in 1996, to its present strategic location on the Ring Road Central, a move which its Chief Executive Officer, Dr Frank Odoom, said represented a catalyst for QIC's future growth.
Rev Kyereme stressed that the speedy redress of price undercutting in the insurance industry was important to safeguard the liquidity of the industry and reminded players in the industry to let the fresh case of the American Insurance Group (AIG), which ran out of liquidity following the recent protracted financial crisis, be a lesson.
The QIC Chairman said the acquisition and opening of the new office marked another chapter in the company's life and would propel it “into higher gear for the realisation of the vision to double its market share in the next five years”.
The Insurance Commissioner, Ms Josephine Jennifer Amoah, said the insurance industry had seen tremendous growth and development built on a stable economy.
Total market premium of insurance companies as of last year was GH¢210 million from the 2001 figure of GH¢42 million, a growth of 400 per cent, with market capitalisation growing from GH¢30 million to GH¢176 million within the same period.
Total assets of the industry also grew by 473 per cent from GH¢73 million to GH¢420 million, as the number of insurance companies increased from 20 to 37 between 2001 and 2007.
“The growth and development experienced has made the industry more vibrant and has increased its appeal to investors, professionals, fresh graduates, policy holders and the general public,” Ms Amoah stated.
She said recent developments on the global financial scene that had affected insurance giants such as AIG helped to emphasise the vulnerability of insurance companies in the country.
“To ensure the survival of our companies, the NIC will introduce risk-based capital requirements next year. Insurance companies will, therefore, not only be required to have the minimum capital but also, most important, the right level of capital to handle the peculiar risks,” Ms Amoah stated.
She commended the QIC for its steady growth and the fact that it was not one of the companies about which the NIC received complaints, an endorsement that it rendered quality services.
Owned by the Catholic Bishops Conference, with the recent entry of some individuals and institutions as shareholders, the QIC has satisfied requirements of the new Insurance Act 2006, Act 724, to separate life from general business by establishing the Quality Life Assurance Company Ltd.
The Minister of State at the Ministry of Finance and Economic Planning, Dr Anthony Akoto Osei, in a speech read on his behalf, said the government recognised the insurance industry as an important catalyst of the financial sector and would not spare any effort at reforming it to put it on a sound footing to absorb bigger risks.
“The government is putting together a legal regulatory framework following the discovery of oil for the insurance of oil rigs and other risks associated with the exploration of oil,” Dr Osei said.
The minister also expressed the hope that insurance companies would participate in the provident fund personal pension spelt out under the new three-tier provision of the new Pension Law.
Story By Samuel Doe Ablordeppey
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