Introduction

The introduction of Value Added Tax (VAT) on insurance premiums in Ghana marked a significant shift in the insurance landscape in 2025. According to Shaibu Ali, the outgoing President of the Insurance Brokers Association of Ghana (IBAG), this policy change notably slowed the uptake of insurance coverage, presenting challenges for both brokers and the broader industry. This article delves into the implications of VAT on insurance, the industry’s response, and the future outlook for insurance coverage in Ghana.

Key Points

Background

The VAT on Insurance Policy

The Value Added Tax (Amendment) Act, 2023 (Act 1107) introduced a 15% VAT on non-life insurance premiums, effective from July 1, 2025. This policy aimed to broaden the tax base and enhance domestic revenue. However, its implementation posed immediate challenges for the insurance sector, particularly in terms of affordability and consumer perception.

IBAG’s Role in the Insurance Sector

IBAG serves as a pivotal body representing insurance brokers in Ghana. The association plays a crucial role in advocating for industry standards, fostering professional development, and enhancing public trust in insurance services. Under Shaibu Ali’s leadership, IBAG focused on expanding membership, improving financial performance, and engaging in international collaborations.

Analysis

Impact of VAT on Insurance Uptake

The introduction of VAT on insurance premiums had a tangible effect on coverage uptake. According to Shaibu Ali, the policy led to a significant slowdown in the number of policies purchased. The 15% VAT effectively raised insurance costs to about 22%, creating a financial barrier for many potential policyholders. This increase was particularly challenging for businesses and individuals who had already finalized their budgets for the year.

Public Perception and Trust Issues

Beyond the financial implications, public distrust in insurance companies remains a persistent issue. Shaibu Ali highlighted that many people still harbor skepticism about the industry’s willingness to honor legitimate claims. This perception, though rooted in past experiences, contrasts with current regulatory frameworks that ensure greater accountability. The National Insurance Commission (NIC) and the Ghana Insurance Association now provide robust mechanisms for addressing grievances and enforcing claim payments.

Role of Insurance Brokers

Insurance brokers play a critical role in bridging the gap between consumers and insurance providers. Shaibu Ali emphasized that brokers possess the same technical expertise as insurance company employees, enabling them to advocate effectively for policyholders. Brokers ensure that policies are correctly structured and claims are honored, thereby enhancing consumer protection and trust.

Practical Advice

For Consumers

• Understand the Costs: Be aware of the additional VAT on insurance premiums and factor this into your budget planning.
• Work with Brokers: Engage with licensed insurance brokers who can provide expert guidance and ensure your interests are protected.
• Verify Claims Processes: Familiarize yourself with the claims process and the safeguards provided by the NIC and Ghana Insurance Association.

For Insurance Brokers and Companies

• Educate Clients: Proactively inform clients about the VAT implications and how it affects their premiums.
• Enhance Transparency: Maintain clear communication about policy terms, claims processes, and regulatory protections.
• Leverage Technology: Utilize digital tools to streamline operations, improve client engagement, and enhance service delivery.

Frequently Asked Questions (FAQ)

What is the VAT on insurance premiums in Ghana?

The VAT on insurance premiums is a 15% tax applied to non-life insurance policies, effective from July 1, 2025. This tax is part of the government’s efforts to expand the tax base and increase domestic revenue.

How does VAT affect insurance costs?

The 15% VAT effectively increases the total cost of insurance premiums by approximately 22%, including other applicable fees. This increase can make insurance less affordable for some consumers.

Why is there public distrust in insurance companies?

Public distrust stems from historical perceptions that insurance companies often refuse to pay legitimate claims. However, regulatory bodies like the NIC and the Ghana Insurance Association now provide robust mechanisms to address such issues and enforce claim payments.

What role do insurance brokers play?

Insurance brokers act as intermediaries between consumers and insurance companies. They possess technical expertise and advocate for policyholders to ensure policies are correctly structured and claims are honored.

How can consumers protect their interests when purchasing insurance?

Consumers should work with licensed insurance brokers, understand the terms and costs of their policies, and familiarize themselves with the claims process and regulatory protections provided by the NIC and Ghana Insurance Association.

Conclusion

The introduction of VAT on insurance premiums in 2025 presented significant challenges for the insurance industry in Ghana. While the policy aimed to enhance domestic revenue, it also increased the financial burden on consumers and slowed coverage uptake. Despite these hurdles, the industry has shown resilience, with IBAG recording growth in membership, financial performance, and international engagement.

Addressing public distrust and enhancing transparency remain critical for the industry’s future. Insurance brokers play a vital role in advocating for consumers and ensuring that policies and claims are managed effectively. As the industry moves forward, collaboration between regulators, brokers, and insurance companies will be essential to foster trust and drive growth.