Change’s Here For You: The New Law and The Insured

The Things We Do For You

There will be no insurance industry without the client. The new law is very cognisant of this fact. Deep at its core is the mandate and undertaking to provide the insured the most optimum of protection. Each and every provision contained in the law, be it directed at the Commission or the insurance and reinsurance company or intermediary, is in the end, to inure to the benefit of the insured.  The rights and interest of the insured is at the heart of this new law and the industry as a whole. For instance, there are provisions on the improvement of corporate governance of both industry players (insurance and reinsurance entities), and the Commission itself—all these are enacted to help build an industry that is able to offer to the insured, among others, timely pay-outs should the insured eventuality happen—without hinderances and delay.

To ensure this, the roles of the Commission together with that of insurance and reinsurance entities are heightened; their responsibilities are increased, and the powers incumbent on them to ensure the effective undertaking of their respective tasks, also increased. Loopholes that allow for ill-performances are uprooted. The supervisory role of the Commission is amped up; so have those checks and balances needed to supervise the Commission itself—the question of ‘who regulates the regulator’ are with these provisions, effectively answered.

For instance, as the Commission is supervising the corporate governance systems of insurance entities in provisions such as sections 54 & 124, sections 56 & 126, sections 72 & 73, section 84, section 167 & 176, etc., it is, on its own, effecting this same supervision on its own self, as seen in sections 8, 9, 11, section 27, etc. all these provisions, we have discussed in the previous ‘Change Has Come’ articles.

On Innovation

Laws that fail at modernisation tend to have negative spillover effects on the societies, industries, countries in which they exist. The nation’s insurance industry risks stunted growth should it stay steeped in its old ways, unresponsive to the fast-changing world around it. And that is exactly the misfortunate scenario Ghana’s new insurance law, Act 1061 sets out to avoid.

Needless to say, the new Act excels at modernisation. It does so in many ways, for instance, with the introduction of new insurance and insurance licences as seen in sections 209 – 211; and famously, through the introduction of new compulsory insurance lines, as seen in sections 214 – 222; also, through the introduction of new funds systems, as seen in section 240, 241, 245. In sections 40 & 110 we see the Act introduce new categories of insurance and intermediary licences—licences that open the doors for new forms of insurances, insurances, which are very much responsive to the digital age around them.

Section 210 introduces us to ‘index insurance contract’, a form of non-indemnity insurance that is specifically of great benefit to agricultural insurances. This is a comparatively new form of insurance where pay-outs are made to the insured based on predetermined index (such as rainfall level, livestock mortality, crop yield, etc.). according to section 210(1)(b), “the amount of payment is determined in accordance with one or more indexes rather than on assessment of the actual loss of the insured…”

Now let’s delve into these provisions…

The Compulsories

The Ghanaian insurance market has as long as the old insurance law, Act 724 have had compulsory insurances. In fact, [stats on compulsory insurances to insurance market performances].

What Act 1061 does is to introduce a much needed, new set of compulsory insurances to add on to the already existing stock. Some times these additions are in fact, legislative backings given to compulsory insurances that have afore existed through Regulations and Directives issued by the Commission.

For instance, Public Liability insurance—that is a new one. Professional Indemnity Insurance—that’s also a new one. A joint reading of Section 214 and the Second Schedule of the Act indicate that all office spaces, banks, shopping malls, factories, hospitals, and all such other places as may be specified by Regulations are required to have public liability insurance cover. Section 216 when read with the Second Schedule of the Act direct that all accountants, medical doctors, insurance practitioners, lawyers, financial and investment analysts, and other professions as may be specified by Regulations are to acquire professional indemnity insurance covers. These, again, are mandatory policies, the flouting of which makes the perpetrator liability to a fine or term of imprisonment.

Insurances for commercial buildings is another one falling under the compulsory insurance category. Actually, this insurance was indicated under the old law, Act 724 as compulsory—specifically under section 183 – 184. But the scope was limited to only such commercial building under construction. What the new law does is to extend this scope to include all commercial buildings—be they completed or under construction. And this can be found under sections 218 – 219 of the new Act.

Marine insurance is another new one. Section 222 states: “A person who imports goods, other than personal effects, into the country shall insure the goods with an insurer licenced under this Act.” It goes on to say, “A person shall not place any marine cargo or hull business, other than reinsurance business, with an insurer which is not licensed under this Act, except with the prior written approval of the Commission.”

And of course, there is the age-old compulsory line, motor insurance. This mandatory insurance is reiterated in this new law, specifically under sections … and the Road Traffic Act, 2004  (ACT 683) 

The Funds

The old law did have fund systems of its own. There were the Fire Service Maintenance Fund, the Motor Compensation Fund, the Clients Rescue Fund, all serving their respective, propitious benefits. The new Act adds to this list by introducing the Agricultural Insurance Fund and Insurance Education Fund. Sometimes, what is done by the new law is to cause some refinement in already existing fund systems—the Fire Service Maintenance Fund of the old now, is with the new law, now a Fire Control Fund.

Now, what at all are all these funds for?

The Agricultural Insurance Fund, for instance, as established by sections 245 – 249 is set to help create the atmosphere of helping make insurance accessible, affordable, and beneficial to the sector, a sector which still comprises the largest chunk of the nation’s GDP. Among others, it is to help provide financial resources to help subsidise agricultural premiums, train agricultural extension officers, to invest in technology to disseminate information on agricultural insurance to farmers, etc. we see this same agriculture-targeted insurance assistance in the afore-discussed section 210 (index insurance contract).

The Insurance Education Fund, on the other hand, as contained in sections 240 – 244 is to provide financial support to the Ghana Insurance College to provide specialised insurance training to insurance professionals, and general insurance education to all Ghanaians.

The Fire Control Fund is a fund to provide financial support to state institutions and any other organisations as may be determined by the Commission to fight fire. It is established under sections 223 – 227, as a refinement of the old law. It does so by, for instance, providing for the establishment of a Fire Control Fund Committee (under section 226) to advise the Commission on the management and disbursement of the Fund, a task which was before left to the sole hands of the Commission under the old law.

Modernisation

Inclusive insurances like microinsurance is given urgent legal backing in section 209. This is to help drive access of insurance to the nation’s small-scale sector—comprising the largest chunk of the nation’s economic segment—presently standing at 90%. This lends much needed legal backing to the NIC’s Micro-insurance Market Conduct Rules, 2013.*

Section 211 – 213 introduce innovative insurance licences. The Interpretation section of the Act (section 259) defines innovative insurance business as those businesses that use “new financial technology or any other innovative technology or method in insurance business”—insurance businesses such a development and distribution of new insurance products, use of data, underwriting, pricing of risk. Innovative insurance intermediaries are also defined as insurance intermediaries that use “financial technology or other innovative technology or method” in their business.

With this section, the regulatory sandbox system introduced in the Ghanaian insurance market and given legislative backing. Regulatory sandbox is a leeway given by the law, as a way of reducing regulatory hurdles standing in the way of companies’ introduction of new concepts and products. Regulatory sandboxes help encourage innovation. And the new law grants persons and institutions maximum period of two years within which they may pilot and test such innovative insurance products.

An Effective Mix For Growth

Change has come to stay. It is all of us our hope that change is effective in the good it sets out to do. Luckily, we all have our individual parts to play in insuring success—the success of the new law in building a robust insurance industry and consequently national economy. Wherever we find ourselves, be it on the Commission, the industry player, or insured spectrum, we each have a duty to the law, industry, and country to ensure this new law, the Insurance Act, 2021 (Act 1061).

This article would be incomplete if mention is not made of section 258. This provision gives, finally, legal oomph to the famous rhyme* ‘no premium, no cover’. This article is incomplete if this question is not asked: why are you not still covered—with all these vast benefits available to you, why are you still without an insurance policy?

[By Adjo, Research & Development]