Risk Assessment Factors

Physical Hazard vs Moral Hazard

Underwriters assess two broad categories of hazard:

Physical hazard refers to the tangible characteristics of the risk. For a building: construction type (concrete vs wood), location, fire protection systems, age, electrical wiring condition. For a vehicle: make, model, age, engine size, security features. For a life: age, health status, occupation, lifestyle.

Moral hazard is far trickier. It refers to the character and behaviour of the proposer. Will they take reasonable care of the insured property? Are they honest? Do they have a history of suspicious claims? Is there any financial incentive to cause or exaggerate a loss?

In Ghana, moral hazard assessment is particularly challenging because formal records are limited. An underwriter in London can check a centralised claims database, a credit score, and a criminal records bureau. In Ghana, you're often relying on local market knowledge, agent references, and professional judgment.

Ghana-Specific Risk Factors by Product Line

Motor underwriting in Ghana:
→Road conditions: the Accra-Kumasi highway has different risk characteristics than Accra city driving
→Vehicle age: Ghana's fleet is significantly older than in developed markets, meaning higher mechanical failure rates
→Driver experience: consider not just licence years but the type of driving (commercial vs private)
→Use of vehicle: a trotro operating 16 hours a day is a fundamentally different risk than a private car driven to work
→Theft hotspots: certain areas of Accra (East Legon, Tema) have higher vehicle theft rates

Fire underwriting in Ghana:
→Market stalls vs permanent buildings: entirely different risk profiles
→Electrical installation quality: a major cause of fires; inspect where possible
→Proximity to other risks: in densely packed markets, one fire can destroy hundreds of stalls
→Fire service response time: outside Accra and Kumasi, response can take hours
→Construction materials: wooden market stalls vs concrete commercial buildings

Life underwriting in Ghana:
→HIV prevalence: while declining, still a factor in pricing
→Access to medical records: limited outside major hospitals
→Occupation risk: mining, fishing, and commercial driving carry elevated mortality risk
→Family medical history: cultural sensitivity required when asking these questions

The Duty of Utmost Good Faith

Insurance contracts are based on utmost good faith: uberrima fides. This means the proposer must disclose all material facts that could influence the underwriter's decision. A material fact is anything that would cause a reasonable underwriter to either decline the risk, charge a higher premium, or impose special conditions.

In practice, this creates a problem in Ghana. Many customers don't understand what 'material facts' means. They may not disclose a previous claim because they didn't realise it mattered, or they may not mention that their building has faulty wiring because they don't see it as relevant.

Good underwriting practice in Ghana means:
→Asking clear, specific questions on proposal forms rather than relying on general disclosure
→Using simple language that customers actually understand
→Following up on answers that seem incomplete
→Being fair in applying non-disclosure: voiding a policy for innocent non-disclosure of an immaterial fact destroys trust and invites NIC complaints