Starr Business has gathered that insurance covers for this year drastically reduced because of the “no premium, no cover” policy.

The National Insurance Commission (NIC) on April 1, 2014 started implementing the “no premium, no cover” policy, which requires insurance firms to collect premiums upfront before providing insurance cover.

It implies that insurance companies will no longer be required to sell insurance products on credit to customers.

The introduction of the policy followed a meeting held between the NIC and insurance and brokerage firms who are members of the Ghana Insurers Association and the Ghana Insurance Brokers Association early in the year.

The development has seen Ghana’s insurance sector record low premiums this year.

Many insurance firms resorted to liaising with banks to provide financial backing for premium financing, but that mechanism was not patronised much.

“Not everyone will want to take a facility from the bank to finance their premium. The large companies did so but the individuals were reluctant to go for a facility to finance their premiums, so the best thing they did is to reduce the cover or not to insure at all,” CEO of Prime Insurance Seth Doh explained to Osei Owusu Amankwaah in an interview.

According to him, insurance companies were also not ready to absorb the interest that was charged on the premium financing.

Doh added that the development is very positive for the sector as they have put all insurance patrons on alert. “Most of the clients are getting out of the shock that: 'Hey now insurance is not done on credit again,' so I have to get ready, get prepared and pay – No premium No Cover has to stay and we think it’s very good for the industry as well.”

Available data indicate that insurance companies were owed a little over GH¢130million in premium debts at the end of December 2012; a situation that made it difficult for insurers to honour claims when due.

The debt, which is 0.35% less than was recorded in 2011, was incurred as a result of people taking various insurance covers without paying the required premium.

At the same time, claims paid by insurance companies increased by 35.8% from the previous year to GH¢99.8million at the end of 2012.