Undercutting is a practice where an insurance company offers lower premium
Ivan Abubakar Avereyireh, former President of the Ghana Insurers Association (GIA), has called for a Gh¢1 million penalty as a punitive measure to curb undercutting in the insurance industry.
Undercutting, a practice where an insurance company offers lower premiums than its competitors to attract more customers, he said, had taken root in the sale of insurance products and must be nipped in the bud.
Delivering a keynote address at the 2025 Ghana Insurance Summit held in Tema, Mr. Avereyireh stated that the current penalty of 5,000 penalty units—equivalent to Gh¢60,000—was not deterrent enough, as most companies could pay the fine without their boards’ knowledge.
The summit, which brought together industry players and other relevant stakeholders from across the country, was themed: “Upholding High Ethical Practices: Tracking Undercutting for Long-Term Sustainability.”
He urged the National Insurance Commission (NIC) to consider increasing the penalty and pushing for an amendment to the provisions in the Insurance Act, 2021 (Act 1061), which stipulates the 5,000 penalty units.
“We are saying that after punishing the companies, we should identify the individual who signed that document that undercuts and single him out for punishment. The Chartered Insurance Institute of Ghana (CIIG) should be able to take the culprit out of the books. Then people will know that if undercutting happens, they will be punished and will refrain from doing it,” he said.
The former President warned that undercutting had dire consequences for the economy, as the insurance sector served as its backbone. He added that the practice was weakening companies by preventing them from charging the right premiums and paying rightful claims.
“If we have weaker insurance companies and unfortunate events occur, and we don’t come in to pay the claimants who genuinely purchased policies believing we would support them, you can imagine how disappointing it will be for them,” he said.
Mr. Avereyireh, who is also a former President of the West African Insurance Companies Association (WAICA), said industry players had failed to act appropriately. He urged them to use innovations, artificial intelligence (AI), and other technologies to promote their products.
“Let’s be ethical and charge the right premiums that the National Insurance Commission requires. Let’s also use product differentiation, quality service, and excellent customer service to distinguish ourselves from other insurers rather than trying to cut back on the correct premiums,” he stated.
Dr. Abiba Zakariah, Acting Commissioner of the NIC, emphasized that the Commission would take a firm stance against those engaging in undercutting, especially as many had been calling for lasting solutions. She noted that while enforcing the law was crucial, continued discussions on the issue were also necessary.
“If tougher sanctions are what it takes to solve the problem, we will not shy away from implementing them. But sometimes, it is not only about fines and charges—it is about punishing people to the extent that they can no longer operate,” she noted.
The Acting Commissioner added that one way to curb the practice would be to have industry players undergo fit-and-proper tests to assess their professionalism and ethical conduct.
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