Compulsory fire insurance - Businesses complying?

BY: Mawuli Zogbenu
Fire insurance
Fire insurance

Fire outbreaks in recent years have, undoubtedly, brought to the fore of the thoughts of many businesses the need for insurance. Many have become more cautious of how to manage their risks.

 Various managements of organisations, as well as some policymakers, have had to carry out a re-evaluation of the country’s safety readiness in respect of the possibility of subsequent occurrences.

The collaboration between trade body, the Ghana Insurers Association (GIA) and regulator, the National Insurance Commission (NIC), in the past few years has led to one of a mutually beneficial relation between the two on one hand, and the public on the other.

Policies designed to aid the improvement in the safety standards of particularly commercial buildings appear to be on course.

The awareness among corporate entities to ensure that they abide by the law to meet the requirements of compulsorily insuring their commercial properties seems to be yielding some positive results.

Insured businesses hardly disclose they have been compensated.

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Industrial fires recorded in recent times have seen a number of them having in place an all-risk-insurance package, thus making it easy for such entities to bounce back into business.

It is also worthy to note that not many of such institutions would come out publicly how they have been compensated from insurance proceeds after having suffered some loss (es).

As a practitioner, in the event of any such fire outbreaks to commercial properties, I have almost invariably apprised myself of the relevant insurance policy in place before the loss from Ghanaian insurers.

It would interest readers to know that many of such commercial entities do have the compulsory commercial property insurance and are duly indemnified.

However, it stands to reason that not every business discipline would want the public to know of how they managed to get back to business after a loss (es).

Fire readiness

Over the past three years, some institutions, including the Graphic Communications Group Ltd (GCGL), collaborated with the Ghana National Fire Service (GNFS) to embark on various simulation fire fighting and rescue exercises to test the readiness of their management and staff.

In the case of the GCGL, the reactions were reported to be spontaneous and real until the supposed fire was brought under control and the essence of the exercise disclosed to the staff.

Incidentally, I happened to be a ‘victim’ of the traffic congestion on the Graphic Road that resulted from this exercise.

The thoughts that hit my mind were whether Graphic had insured this building against fire and other perils, as required by law.

What is commercial property insurance?

Commercial Property Insurance is used to cover any type of commercial property.

It protects commercial property from such perils as fire, theft, collapse, public liability, natural disaster and the like.

This type of insurance covers a variety of businesses, including manufacturers, retailers, service-oriented businesses and not-for-profit entities.

Even though commercial property insurance is cost for businesses that use properties with equipment worth thousands or millions of Ghana cedis, it is worth its salt since the premiums paid are a negligible percentage of the total value of properties ranging from 0.185% to 0.3% depending on several risks factors.

By illustration, assuming one has a commercial property worth GH¢200,000, the highest annual premium to pay would be about a cool GH¢600! In the event of fire or flood bringing this property down, the property owner is compensated up to the tune of that GH¢200,000.

Very simple and highly affordable! Putting up a property worth GH¢200,000 is certainly more capital intensive to protect it at a paltry GH¢300. A commercial property worth GH¢200,000 might not mean so much to a business owner until s/he loses it through fire outbreak or its allied perils.

It would be even worse when lives are involved, including the legal damages that may arise therefrom.

The Insurance Act 2006, Act 724

In Ghana, the Insurance Act 2006, Act 724 requires that all commercial buildings and those under construction are insured with an insurance company against the hazards of collapse, fire, earthquake, storm and flood, and an insurance policy issued for it.

A certificate of insurance with security features will be issued as evidence of the insurance, and is required to be displayed or produced for inspection by the relevant authorities, in this case the NIC-GNFS task force.

A certificate, red in colour, is issued for completed commercial buildings, while a blue colour is issued for those under construction.

A commercial building, under the law, includes educational and medical premises, hospital facilities, shops and premises or offices for the transaction of all forms of businesses.

The NIC has made frantic efforts in the past and is still doing so in collaboration with the GNFS to deepen education and also to enforce compliance with the compulsory fire insurance policy on commercial properties in the country.

The GNFS task force has been commended on many occasions for its assistance which is presently