BTA2023 The Ghana Insurers Association (GIA) has announced a 10 percent increase in motor insurance premiums, which took effect on February 1, 2025. This decision comes after a series of discussions and deliberations at an emergency meeting held on January 31, 2025, with the aim of addressing the mounting operational costs resulting from inflation and currency depreciation.
Tariff Adjustment and Regulatory Challenges
This tariff adjustment follows a prior communication from the National Insurance Commission (NIC) on January 29, 2025, which temporarily halted the implementation of the new motor tariffs. The NIC had initially announced the new tariff in December 2024 but postponed the implementation due to unforeseen developments. The NIC instructed insurers to continue using the 2024 approved tariff while further updates were awaited.
Despite the NIC’s temporary halt, the GIA has pressed forward with the tariff increase, warning that any insurer failing to comply will face sanctions in line with the Association’s constitution. GIA emphasized that industry-wide compliance is critical to ensure fairness and stability within the sector.
Impact of Inflation and Currency Depreciation
The GIA’s decision to raise premiums comes as a result of the ongoing economic pressures in Ghana. The country’s inflation rate reached 23.8% in December 2024, with the Ghanaian cedi depreciating by an average of 24.8% against the US dollar throughout the year. This depreciation has significantly increased the cost of spare parts, a key component of motor insurance claims.
Kingsley Kwesi Kwabahson, CEO of GIA, explained that while motor insurance tariffs have only risen by 20 percent over the past three years, the actual rise in associated costs has far outstripped this increase. Despite absorbing rising costs for a long period, insurers have reached a point where a modest tariff increase has become necessary to ensure they can continue settling claims.
New Premium Rates
With the new pricing structure, private vehicle owners will see their annual premiums rise from GH¢482 to GH¢530, while commercial drivers, including taxi operators, will see their premiums increase from GH¢637 to GH¢701. Motorcyclists, facing higher risk exposure, will experience the highest percentage increase, with premiums rising by nearly 20 percent from GH¢252 to GH¢302.
Legal and Regulatory Justification
In response to concerns about the legality of the premium hikes, the GIA clarified that the tariff adjustments comply with the Insurance Act, 2021 (Act 1061). Under section 256 of the Act, insurers are permitted to adjust premiums in line with their risk exposure to ensure the sustainability of claims payments. According to Mr. Kwabahson, these adjustments fall well within the regulatory guidelines.
Impact of the Domestic Debt Exchange Programme (DDEP)
In addition to inflation and currency depreciation, insurers have also faced challenges stemming from the government’s Domestic Debt Exchange Programme (DDEP) introduced in December 2022. This programme restructured Ghana’s debt, impacting the liquidity of many financial institutions, including insurance companies. The resulting financial strain has made it increasingly difficult for insurers to maintain stable pricing without revising premium rates.
Benefits of the Tariff Adjustment
While the tariff increases have raised concerns, the GIA emphasized that the adjustments are minimal. For instance, the lowest premium increase translates to just GH¢4 per month or 13 pesewas per day. Additionally, the revised tariffs include improvements in coverage, such as a 33.33 percent increase in Third Party Property Damage Indemnity, which is expected to provide policyholders with better protection in the event of accidents causing damage to third-party property.
The GIA also noted that the new tariffs were determined after extensive consultations with key stakeholders, including transport unions and operators. This feedback, especially from customers, highlighted a strong demand for higher property damage coverage, which the GIA has addressed in the new tariff structure.
Conclusion
Despite the economic challenges faced by the insurance sector, the GIA’s 10 percent tariff increase is seen as a necessary step to ensure the financial stability of insurers and the continued provision of quality services to policyholders. By prioritizing the sustainability of the insurance industry, the GIA hopes to foster long-term growth and stability within the sector while improving coverage for consumers.
