Dr Justice Yaw Ofori- Commissioner of Insurance
Doing business is exposed to numerous risks that threaten property, life and health of employees, as well as business continuity. It is assumed that there are about 450 different types of risks in the world (Marovic and Avdalovic, 2006, p. 46).
Doyens of economic thought, Samuelson and Nordhaus emphasize that economic life is a risky business (Samuelson and Nordhaus, 2009, p. 205). Recently, businesses are more exposed to uncertainty and various risks such as pandemics, terrorism, natural disasters, software viruses, and the like.
New technologies, especially information and communications, modern ways of doing business that require delivery to business partners and consumers just when they need it, Just-in-Time (JIT), as well as a rapidly changing business environment bring numerous advantages, but also numerous challenges.
Supply chains are becoming longer and highly technologically dependent, which, on the one hand, improves the efficiency of doing business, but at the same time, in the case of the risks that lead to business interruption, the potential consequences are far more devastating than they were twenty years ago due to the strong interdependence of risks
It goes without saying that one of the methods of mitigating risks associated with business is through insurance. There are varied forms of insurance for different purposes and one of such is Marine Insurance.
Marine insurance is a contract whereby an Insurer undertakes to indemnify an Assured in a manner and to the extent thereby agreed, against losses incidental to a marine adventure.
In Ghana, Marine Insurance is regulated by the Insurance Act 2006 (Act 724) and the National Insurance Commission (NIC) is the body mandated to oversee compliance with that law.
The Insurance Act 2006 (Act 724)
The Insurance Act, (Act 724) states in section 37(1) that “unless authorized by the Commission, a person shall not enter into a contract of insurance with an offshore insurer in respect of (a) Property situate in the country, (b) Liabilities arising in the country, or (c) Goods, other than personal effects, being imported into the country. Section 37(2) further states that “A person who contravenes subsection (1) commits an offence.”
The law is therefore, aimed at ensuring that all imported goods are insured locally. By implication, if a person imports goods into the country on Cost-Insurance-Freight (CIF) basis with insurance undertaken outside Ghana, then that person is clearly in breach of the law.
The Current Situation
It is instructive to note that most goods imported into the country are insured with overseas or offshore insurers contrary to what is in the Insurance Act, 2006 (Act 724),
It is estimated that in 2018, only 6% of imports into Ghana were insured locally. A market research conducted by the National Insurance Commission (NIC) in 2019 estimated that about 75% of importers have no knowledge or little knowledge about the Marine Cargo cover they pay for. The research also indicated that most importers in Ghana have less or no knowledge about how to make claims on Marine Cargo insurance with offshore insurers.
The Ghanaian insurance market has not benefited much from the huge investments in infrastructure and high value of imports/exports in the shipping industry.
Challenges with Offshore Cargo Insurance
It is important to point out that most of the foreign insurance covers taken by local importers do not provide inland protection for imported goods. Once goods dock at the port, their insurance covers expire thus requiring importers to acquire additional insurance policies to cover the risk in transporting their goods to the warehouse or to the final destination.
Similarly, most importers do not know their offshore insurers and there is clear limitation in terms of language and communication in most cases.
Additionally, there is difficulty in filing for claims if there is an eventuality and, in most cases, importers do not know the extent of insurance cover, making it difficult for them to get the desired results from the filing of claims.
Last but not least, payment of offshore insurance premiums constitutes high cost to the Importer in terms of foreign exchange losses and bank charges.
Advantages of Insuring Goods in Ghana
The benefits of insuring goods with local insurance companies include quicker claims handling process locally in cases of loss or damage to cargo and a reduction in foreign exchange flight in the form of overseas insurance premiums among others.
National Insurance Protocol
Due to the significant level of imports into the country, a well-placed marine cargo insurance mechanism could give a major boost to the insurance penetration rate in the country. The need for a well-thought-out mechanism for the placement of cargo insurance for all modes of transportation has given rise to the development of a National Cargo Insurance Protocol as a first step towards the implementation of the Insurance Act.
The Ghana Shippers’ Authority (GSA), the Ghana Revenue Authority (GRA) and the National Insurance Commission (NIC), supported by industry stakeholders have therefore developed this protocol to set out the rationale and principles underlying the placement of cargo insurance in Ghana in line with the Insurance Act 2006, (Act 724).
It is important to note that in Ghana, the business of insurance and the activities of the insurance market players are regulated and supervised by the NIC per the Insurance Act, 2006 (Act 724).
The activities of the GSA are also geared towards the protection and promotion of the interest of shippers in Ghana’s commercial shipping sector in relation to international trade and transport logistics.
The GRA is also charged with the task of assessing, collecting and accounting for tax revenue in Ghana. The Customs Division of GRA is the agency vested with the mandate of monitoring, regulation and inspection of exports and imports in Ghana under the Customs Act 2015, (Act 891) as amended.
The three state institutions have since been collaborating to ensure compliance with respect to the placement of marine cargo insurance in Ghana. The National Cargo Insurance Protocol will formally be signed on 26th November, 2020 and promises to be a game-changer. The implementation of the protocol is expected to bring enormous benefits to key players in the international trade community, particularly shippers and the country as a whole.
This couldn’t have come at a better time as this will open a window of opportunities for all stakeholders.