Notes on
Insurance Policy and the Proposal Process in Ghana
In Ghana, the process of obtaining
insurance involves two primary stages: the proposal process and the issuance
of the insurance policy. Both stages are regulated by the Insurance
Act, 2021 (Act 1061) and guided by common law principles. This document
highlights the steps, principles, and key considerations involved in these
stages within the Ghanaian insurance landscape.
1. The
Insurance Proposal Process
The proposal process is the initial stage
of forming an insurance contract, during which the prospective insured
communicates their intention to obtain coverage.
a.
Submission of Proposal Form
The proposal form serves as the foundation of the
insurance contract. It is a document provided by the insurer that the
insured must complete with accurate and comprehensive details.
Information requested typically includes:
Personal details of the proposer (e.g., name,
address, occupation).
Nature and details of the risk to be insured (e.g.,
type of property, health condition, or type of business).
Past claims history.
b.
Importance of Disclosure
Utmost Good Faith (Uberrimae Fidei): The
proposer is legally obligated to disclose all material facts that could
influence the insurer’s decision to accept or reject the risk.
Material facts include pre-existing health conditions
(in life insurance) or prior claims history (in general insurance).
Failure to disclose such facts may render the policy
voidable at the insurer’s discretion.
c. Risk
Assessment and Underwriting
Upon receiving the proposal form, the insurer
evaluates the risk.
Factors considered include:
Nature and extent of the risk.
Proposer’s risk history and profile.
External factors such as environmental or market
risks.
Based on this assessment, the insurer decides:
Whether to accept or reject the risk.
The appropriate premium for the coverage.
d. Premium
Quotation
If the insurer agrees to provide coverage, they issue
a premium quotation to the proposer.
The premium reflects the degree of risk and the extent
of coverage requested.
e.
Issuance of Cover Note (Temporary Cover)
Before the final policy document is issued, the
insurer may provide a cover note, which
offers temporary coverage for the insured risk.
2. The
Insurance Policy
An insurance policy is the formal
document issued by the insurer after the proposal process is completed and the
contract is finalized. It serves as the evidence of the agreement between the
insurer and the insured.
a.
Structure of an Insurance Policy
An insurance policy typically includes
the following components:
Policy Schedule
Contains the specifics of the insured risk, including
the insured’s details, coverage start and end dates, sum insured, and
premium amount.
Operative Clause
Specifies the scope of coverage, detailing the risks
or events that the insurer agrees to indemnify.
Terms and Conditions
Outlines the obligations of both parties, including
premium payment schedules, claim procedures, and exclusions.
Exclusions
Lists the events, circumstances, or risks not covered
by the policy.
Endorsements
Records any amendments or additions made to the
policy during its tenure.
Signature and Authentication
The policy document is signed and authenticated by
the insurer to make it legally binding.
b. Role of
the Insurance Policy
Evidence of Contract: The policy
serves as proof of the agreement between the insurer and the insured.
Reference for Claims: In the
event of a claim, the policy provides the basis for assessing the validity
and extent of the claim.
Legal Protection: The terms outlined in the policy
protect the rights and obligations of both parties.
c. Types
of Insurance Policies in Ghana
Common types of insurance policies
include:
Life Insurance Policies: Provide
financial protection to beneficiaries in the event of the insured’s death.
Health Insurance Policies: Cover
medical expenses.
Motor Insurance Policies: Protect
against losses arising from motor accidents.
Property Insurance Policies: Provide
coverage for damages to property.
3. Legal
and Regulatory Considerations
a. Role of
the Insurance Act, 2021 (Act 1061)
The Act mandates that all insurers in Ghana provide
clear and comprehensive policy documents.
It requires insurers to adhere to transparency in the
proposal process to prevent disputes.
b.
Oversight by the National Insurance Commission (NIC)
The NIC ensures that insurers comply with regulatory
requirements during the proposal process and policy issuance.
It also facilitates the resolution of disputes between
insurers and policyholders.
c. No
Premium, No Cover Principle
The NIC enforces the rule that insurance coverage
cannot commence unless the premium is paid.
4.
Challenges in the Proposal and Policy Processes in Ghana
a.
Incomplete or Misleading Disclosures
Many proposers fail to disclose material facts due to
lack of awareness or intentional omission.
b.
Complexity of Policy Documents
Policy terms are often written in technical language,
making them difficult for policyholders to understand.
c. Delays
in Policy Issuance
Administrative inefficiencies sometimes delay the
issuance of policy documents, leaving proposers uncertain about coverage.
d. Low
Insurance Penetration
The proposal process is hindered by limited public
understanding of the importance of insurance.
5.
Improving the Process
a.
Simplifying Documentation
Insurers should design user-friendly proposal forms
and policy documents.
b.
Enhancing Public Education
The NIC and insurers should collaborate on awareness campaigns
to educate the public on the importance of full disclosure and
understanding policy terms.
c.
Leveraging Technology
Digital platforms can streamline the proposal process
and policy issuance, reducing delays and errors.
6.
Conclusion
The proposal process and the insurance
policy are critical components of the insurance contract formation in Ghana.
While the proposal process sets the foundation by assessing and accepting
risks, the policy formalizes the agreement and provides the insured with legal
and financial protection. Addressing challenges through education,
simplification, and technological innovation will enhance the overall insurance
experience in Ghana.
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