Motor insurance premiums are expected to be increased by more than 30% from January 2024.
The increase is due to a 21% increase in Value Added Tax (VAT) that will be imposed on non-life products from January 2024, in addition to a 10% increase in Motor Insurance Premiums.
The Chief Executive of the Ghana Insurers Association, Dr. Kwesi Kwabahson, disclosed this to host George Wiafe on PM Express Business Edition on December 14, 2023.
The development will also increase the cost of non-life products.
According to Dr Kwabahson, the government is seeking to pass a law to legitimise the increase under a “Certificate of Urgency”.
It will be implemented under the Value Added Tax Amendment Bill 2023, which is currently before Parliament for consideration and approval.
Dr Kwabahson noted that per the new calculations, a motor policyholder may end up paying 34% more than the current charges.
The Draft VAT Amendment Bill shows that the provision of financial services is exempted unless the provision of Non-Life Business.
If the bill is approved by parliament, insurance firms will go ahead and charge 21% VAT on the supply of non-life products to customers.
The bill also indicates that concerning compensation to clients, there should be provision for some deductions to be done going forward.
Impact on the insurance industry
Dr Kwabahson noted that the insurance players are worried about the development because of how it could affect the growth of motor insurance in the country.
“Already, the industry is not doing that well, coming on the back of the Domestic Debt Exchange Programme shocks”, he said.
Dr Kwabahson maintained that the move to impose VAT will rather hurt the industry than aid its growth, warning that “the biggest casualty here, will be the policyholders who may struggle to afford motor insurance going forward”.
“Already, we are struggling to convince every Ghanaian to take up insurance. What this move by the government will do is that it may discourage a lot of people from signing up for the various non-life insurance products including motor insurance going forward”, he complained.
He pointed out that already, insurance companies are recovering from the Domestic Debt Exchange Programme.
“Currently, we are compelled to cut the benefits, that one can enjoy from the Compensation Fund and that is as a result of the impact of the Debt Exchange Programme and the situation could be worse going forward if we increase the premiums”, he said.
The proposed increase will affect Motor Insurance, Fire, Liability Insurance, Marine Insurance, as well as some of the compulsory insurance that are supposed to be taken and professional indemnity.
Dr Kwabahson also disclosed that the association is currently engaging the regulator to see how their concerns can be addressed.
Source: myjoyonline
