Change Has Come: The New Insurance Law

CHANGE HAS COME: THE NEW INSURANCE LAW

The Necessary Chameleon

Insurance is an economic ingredient. It is as urgent an economic ingredient as trade and industry, as health, education, etc. Insurance is a financial tool, an engine for growth which has proven itself indispensable in many successful economies worldwide. There is a treasure trove of evidence existing globally, showing the direct correlation between insurance and socioeconomic development. And Ghana is no way a stranger to this truth. Since the first post-colonial insurance company, the Gold Coast Insurance Company was established in 1957, the country has put in place crucial measures—legal, regulatory, and institutional—towards ensuring the growth of the sector, so as to in turn help spur economic growth.

Change is crucial for growth. Again, Ghana is in no way a stranger to this truth. Because post-colonial era, the industry has seen sustained and merited changes, changes that have contributed their respective quotas to helping create a robust insurance industry. In this article, we look at the legal and regulatory changes brought about, specifically, by the new insurance law, the Insurance Act, 2021 (Act 1061).

There is a New Law In Town

There is a new law in town. The first question that arises is: why? Why a new legislation? The simple answer is this: modern times call for a modern law—that is if we want to stay relevant in these modern times. The insurance sector has been performing at a steady pace, yet it is in dire need of exponential growth. To ensure growth in the sector, modifications had to be done to the industry and its factions. We will categorise the nation’s insurance factions as such:

1. The regulatory agency (i.e., the National Insurance Commission (NIC))
2. The industry players (i.e., insurance companies, reinsurance companies, intermediaries like brokers, etc.)
3. The end products (i.e., the insurance products introduced to the market)
4. The consumer (i.e., the insured)

For change to be effective, change ought to be thorough. This is a truth which—you guessed it— our insurance sector is no stranger to. So, we have this new law, Act 1061, introducing provisions that positively affect all these factions. We will begin by looking at the regulator, and reserve the other factions for subsequent articles.

The Regulator

1. The flexing of arms

The new law is set to strengthen the regulator (the National Insurance Commission (NIC)) to help it better attain its duties and objects as stipulated in section 2(1) of the Act; objects which include, among others, promoting a “fair, safe, efficient, and stable insurance market and the development of a sustainable insurance market; [contributing] to the stability of the financial system of the country; [supporting and encouraging] financial inclusion within the insurance market…”, and its newly legislative-backed mandate, to “support and promote insurance penetration.”

To perform these objects as succinctly summarised under section 2 of the Act, the Commission is with section 3 empowered to issue directives, guidelines, instructions, etc. to insurance entities, and issue licences to these corporations as it may deem fit. Its duty of monitoring the insurance market is given a broader scope as the Commission is given the power to undertake a ‘group wide supervision’ on insurance entities. The Commission may “supervise licences on an individual basis and where appropriate on a group basis” whenever it deems necessary, the Act reads.

Section 5 of the Act is also a new one. It provides for the uninhibited independence of the Commission in discharging its functions. But don’t we all know how futile the concept of independence can be when one is without financial independence. Realising this, the law provides for means through which the Commission may derive financing for its proper functioning and attainment of its objects. Section 31 provides for the borrowing power of the Commission. Section 32 makes stipulations on the levies and contributions receivable by the Commission from industry players and other entities as stipulated by law.

The Act also makes various provisions for the creations of new funds, adding to the already existing funds mandated by law. In sections 240 to 241 we find the newly unveiled ‘Insurance Education Fund’, a fund set up to provide specialised insurance training to insurance professionals and students of insurance, and general insurance education to Ghanaians. Sections 245 through to 249 provide for the establishment of an ‘Agricultural Insurance Fund’, a fund set up to ensure insurance penetration in the agriculture sector, and the extension of the vast financial benefits of insurance to the nation’s largest economic sector.

The scope of entities falling under the Commission have been widened to include innovative insurers and reinsurers, intermediaries, technical service providers, micro-insurance agents, insurance syndicates managers, insurance investigators, etc. And yes, with this, the new law introduces new insurance licences—specialised licenses aimed at helping transfix the insurance industry into this Information Age. This move is undoubtedly very indicative of the industry’s proactiveness, and its quickness to metamorphosis itself to be in tune with modernity. The new law is as tech savvy as the very world around it. This spells exciting times for the sector and consequently the nation as a whole. This magic is contained in sections 40 & 110 of the Act.

1. With great power comes great responsibility

With these added rights come further responsibilities on the Commission. Section 8, for instance, is a new one. It provides for duties and liabilities of members of the Board of the Commission and spells out penalties for the breaches thereof. According to this new law, a member of the Board has the same fiduciary relationship existing between them and the Commission, as a director of a company has to the body corporate of which they form a part. They are to act with the same loyalty and good faith as required of such directors of companies incorporated in accordance with section 190 of the Companies Act, 2019 (Act 992). The law, with section 27, calls for the establishment of an Internal Audit Unit within the Commission in accordance with the Public Financial Management Act, 2016 (Act 921).

While the Commission is regulating other entities, it is, in itself, subject both to a self-regulation, and regulations by national agencies higher than it in authority. With this new law, not only is the Commission to face a facelift locally, but it is to find itself on par with international best practices.

That is not all; the new Act has more. Let’s hop right unto the next article to find out the role the industry player is to play in all this. We will navigate too, how the insured, the industry player, the industry, and the economy as a whole is to benefit from this facelift. These are indeed exciting times…

[By Marcia, Research & Development]