Motor insurance premiums in Ghana are expected to witness a surge of more than 30% starting January 2024.

This increase is attributed to a proposed 21% rise in Value Added Tax (VAT) on non-life products, coupled with an additional 10% increase in Motor Insurance Premiums. 

The imminent rise in premiums is driven by the introduction of a 21% VAT on non-life products, a move set to be legitimised through the Value Added Tax Amendment Bill 2023, currently before parliament for consideration and approval.

If the bill is sanctioned, insurance firms will implement a 21% VAT on the supply of non-life products, impacting various insurance categories, including Motor Insurance, Fire, Liability Insurance, Marine Insurance, and compulsory insurance.

Dr Kwesi Kwabahson, Chief Executive of the Ghana Insurers Association, expressed concern about the potential negative impact on the growth of motor insurance in the country, emphasising that the insurance industry is still recovering from the shocks of the Domestic Debt Exchange Programme. 

He warned that such 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.

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.