Business News of Tuesday, 3 February 2015
Life insurance companies in the country are unhappy that the Controller and Accountant-General’s Department (CAGD) has increased from one percent to three percent what it charges them for deducting premiums on their behalf.
The companies claim that they have been caught unawares by the “sharp increase”, and for that matter it will surge their management expenses and affect expected premium earnings for the year.
Effective January 15 this year, the Controller and Accountant-General’s Department raised its charges for the various deductions it makes from the salaries of government workers on behalf of all third party institutions — including insurance companies, credit unions, financial institutions, hire purchase companies, and welfare unions.
However, members of the Insurance Council — the umbrella-body of life insurance companies in the country — told the B&FT that the new charge is too much for them as it will raise their operational expenses and projected premium targets.
“We want the Controller and Accountant-General to reconsider its directive to raise the charge for premiums deduction services they provide on our behalf.
“We were not expecting this because we worked on our 2015 budget with the one percent service charge; so this increase will obviously add to our management expenses and also affect premium projections for the year,” a council member said.
But the request from the life insurers is far from being granted, as the CAGD has argued that the increase is cost-oriented.
Mark Opoku Amponsah, Head of Third Party at the Controller and Accountant-General’s Department, disclosed to B&FT that there was need to increase the service charge to absorb operational expenses as the department migrates the premium deductions process onto an electronic platform.
Mr. Amponsah said with the electronic platform, the third party institutions can now process their advance forms, authority notes and other related transactions from their respective offices for the Department to validate on their systems.
“We have increased our service charge from one percent to three percent but it is cost-oriented, and it is affecting all third party institutions that we provide services to. The reason is that we are migrating our processes onto an electronic platform.
“Based on several complaints from the third party institutions about bad debt and related challenges, we secured the services of a consultant to develop an electronic platform — Third Party Referencing System — that will address those challenges.
“People take policies and their deductions do not go through because they cannot afford payment, and so the electronic platform will do away with all challenges that have to do with third party deductions — making operations of both the Department and third party institutions more convenient and hassle-free,” he said.
Mr. Amponsah said the system was secured through a public-private partnership, hence the need to increase charges to cater for the operating and maintenance of the system to make it efficient so as to facilitate seamless operations.
He said the monies accrued from the service charge will go into government’s coffers after internal operating costs have been absorbed.