Adnan Adams Mohammed
Car owners are expected to pay over 30 percent more on insurance premiums starting January 2024.
The expected increase is a resultant of the 21% rise in Value Added Tax (VAT) on non-life products and a 10% increase in Motor Insurance Premiums.
The 21% VAT on non-life products is contained in the Value Added Tax Amendment Bill 2023, which has been approved by Parliament. The amended VAT law will ensure insurance firms charges a 21% VAT on the supply of non-life products, impacting on various insurance categories, including Motor Insurance, Fire, Liability Insurance, Marine Insurance, and compulsory insurance.
“A VAT imposition might discourage individuals from availing themselves of various non-life insurance products, including motor insurance, as policyholders may find it challenging to afford increased premiums”, Dr Kwesi Kwabahson, Chief Executive of the Ghana Insurers Association, in an interview last week said.
He expressed concern about the potential negative impact on the growth of motor insurance in the country, emphasizing that the insurance industry is still recovering from the shocks of the Domestic Debt Exchange Programme.
Additionally, Dr Kwabahson highlighted ongoing engagements with regulatory bodies to address industry concerns.
The proposed increase has raised apprehensions within the insurance sector, particularly regarding its potential effect on policyholders and the overall growth of the industry.
The Chief Executive also touched on challenges related to the Minimum Capital Requirements (MCRs) and Capital Adequacy Ratio (CAR) for insurers.
While advocating an increase in the minimum capital requirement to fortify insurance firms’ operations, he underscored the need to avoid idle capital for the industry’s benefit.
Furthermore, Dr Kwabahson addressed reports of price undercutting within the insurance sector, emphasising that such practices are discouraged by the Insurance Act.
The Association is taking self-regulatory measures to ensure compliance and warned that violations could lead to severe sanctions.
He made this revelation during an interview on PM Express Business Edition on Accra-based Joy News on December 14, 2023.
