The National Insurance Commission (NIC) has exercised its powers conferred by Section 44 of the Insurance Act, 2006 (Act 724) and issued a directive to impose limits on Motor Injury and Death claims in the country.
Section 44 of the Insurance Act, 2006 (Act 724) provides that the Commission in consultation with industry players shall by regulations, prescribe a formula to compute compensation in respect of injury and death claims arising out of a motor accident. In Ghana, compensation for injury and death claims over the years has been unlimited and decided by the “power of negotiations”. The directive affects all motor policies issued after July 1, 2019.
The Commission says the directive is to bring the practice of injury and death claim settlement within the provisions of the Insurance Act 2006 which provides that, motor insurance policies must have anticipated maximum exposure limits at the inception of the policy.
Standard Injury Claims
For standard injury claims, the commission has put a cap of GH¢ 50,000 per person. Using a formula of number of seats by limit per person multiplied by 110%, there is a limit on every vehicle per event. For example, a 10- seat vehicle will have a limit of GH¢ 550,000 per event (10 x GH¢50,000 x 110%). What this means is that in the event of an accident, an insurer will not pay in excess the sum of GH¢550,000 regardless the number of people who fall victim to the accident. The remaining liability is borne by the insured.
These limits however exclude medical expenses and solicitor’s fees. Medical expenses shall be paid up to a maximum of GH¢20,000 subject to proof of verifiable medical receipts. Solicitor’s fees remain at 15% of the negotiated compensation sum.
Special Injury Claims
Special injuries are cases an insurer would have to deal with very infrequently. They require significantly huge amounts of payments due to its severity. Special injury cases include paralysis, amputation up to the knee or above, severe head/brain injury and total loss of sight in both eyes. They may also include conditions recommended by medical professionals as special. In addition to covering all medical costs associated with special case injuries, the claim amount will be up to GH¢300,000 per person. This will have no effect on the limit on a vehicle per event.
Where the deceased was hospitalized before death, an insurer will pay medical expenses up to a maximum of GH¢20,000. Compensation for death shall be computed in multiples of the annual minimum wage by limits set for funeral expenses, spouse benefits and dependents benefits. Typically, death compensation (excluding medical expenses and legal fees) will not exceed GH¢32,400 per person. Compensation sum for deceased persons aged above 60 years will however not exceed 75% of the maximum amount.
Caps not automatic
It is worthy to note that the caps are only the maximum pay-outs hence the compensation sums will be settled through negotiations between the insurer and the claimant or solicitor where applicable.
Insurance companies across the country have welcomed the directive by the NIC as a step in the right direction. The directive will facilitate setting injury and death liability reserves by insurers and enhance financial forecasting. It is argued that it has the potential of plummeting reckless and negligent driving throughout the country. There have however been concerns raised by some quarters that many insured may not have the financial muscle to bear excess liability in case of gruesome accidents.