Insurance companies have agreed to sell motor insurance cover at a cost of GH¢1.30 a day, making it the first time that car owners can purchase insurance on a short-term basis.
By this new policy, which will commence today, vehicle owners can purchase insurance for at least on a monthly basis, which however comes at a cost of 10-20 percent more than when one buys a policy on an annual basis to cover administrative and processing cost.
This is a sharp deviation from the previous practice whereby vehicle owners were mandated to buy insurance on an annual basis.
As a result of the new policy, the annual premium for the least motor insurance policy -- third party insurance -- will now cost GH¢471 for private cars, which hitherto cost GH¢70; while that of commercial taxis has been priced at GH¢576 per annum.
According to the 2015 motor insurance tariff, underwriting and implementation guidelines approved for implementation by the General Insurance Council and the industry regulator, National Insurance Commission, third party premium for mini-buses commonly called ‘Trotro’ has also been set at GH?586 with motorcycles required to pay GH¢256 for an insurance.
The rise in the third party insurance tariff will have a multiplying effect on the costs of buying comprehensive insurance policy, since there is a thirdparty component in any premium paid for a comprehensive cover.
Even though the face value of third party insurance policies has now gone up substantially, insurers have explained to the B&FT that the increment will help insurance companies to support third party road accident victims by paying claims when they fall due.
The B&FT understands all the stakeholders, including the Ghana Insurers Association and National Insurance Commission, have agreed to the increment as input costs of the insurance firms have all gone up.
This is the first times in five years that motor insurance premium has been increased and will take effect, today Monday June 8, 2015, to help insurance companies compensate vehicle passengers that may be involved in an accident.
Previously, motor insurance cover was sold on an annual basis, and insurers believe this new motor underwriting guideline of selling motor insurance policies will make it flexible and allow insurance companies to meet increasing third party claims.
Some heads of insurance companies explained to the B&FT that the increment has been necessitated by the increases in fuel and utility tariffs, as well as the unstable macroeconomic environment that has seen the cedi collapse.
“In 2010, when we last increased motor insurance premiums, the cedi was trading at GH¢1.47 to a dollar. Today, it cost GH¢4 cedis to a dollar. Within the same period, inflation has increased from 8.58 percent to 16.8 percent while fuel prices have also increased from GH¢1.75 a litre to GH¢3.3.
“Tariffs for utilities have also gone up, just as road traffic accidents with the ever-increasing liabilities assumed by underwriters; both under the third party injury and death and own-damage claims. There is no doubt that to continue charging the same premiums would eventually collapse the motor portfolio and incapacitate our ability to effectively meet our obligations to policyholders and third party victims of motor accidents,” they argued.
The Ghana Insurers Association (GIA) -- the umbrella organisation of insurance companies -- says it has put in place measures to ensure strict compliance with the new motor insurance tariffs and prevent insurers from undercutting to gain “unfair advantage”.
“We urge motor underwriters to ensure strict compliance with the new tariff and underwriting and implementation guidelines. Clandestine monitoring arrangements have been put in place, and those found going contrary to the new tariff will be severely sanctioned,” the CEO of the GIA, Atsu Kosi Menyawovor said in a correspondence to insurers sighted by the B&FT.