Making insurance work for Ghana
The first ‘International Microinsurance Conference – Learning Sessions’ in Africa took place on 22 and 23 May 2012 in Accra, Ghana. The “Learning Sessions” are tailor-made local expert meetings addressing questions specific to a particular market and complementing the annual International Microinsurance conference.
Around 170 national and international insurance experts representing insurance companies, brokers, distribution channels and other interested parties participated in the first African “Learning sessions” organised by the National Insurance Commission of Ghana (NIC) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in partnership with three high profile organisations active in the microinsurance sector: the Munich Re Foundation, the Microinsurance Network and financial sector development initiative Making Finance Work for Africa. Renowned speakers from Ghana, Kenya, South Africa, Ethiopia, India, the USA and various European countries provided national and international perspectives regarding the challenges and opportunities involved in providing microinsurance services to customers in Ghana.
In six interrelated sessions, participants discussed the regulatory framework in Ghana, the importance of consistent data collection and the appropriate pricing of microinsurance products, the latest research findings on customers’ needs and different channels and innovative technologies designed to reach out to customers.
Distribution channels and technology are key
According to a market survey by GIZ and the NIC presented at the conference, 20 microinsurance products are currently on offer in Ghana, provided by 15 different companies. Microinsurance is a new and developing market, which is likely to see even more expansion in the near future. Of the 20 products on the market, 14 provide life or funeral cover, four are non-life and two offer combined life and non-life cover. No health products were identified. The main microinsurance distribution channel, with the potential to reach over 400,000 clients or 80% of the microinsurance market is the mobile phone sector. This clearly indicates the importance of “mobile-money”, i.e. financial transactions using cell phones, which can substantially reduce microinsurance transaction costs.
Ghana is a good example of the potential mobile banking has to revolutionise the banking sector in developing countries, putting the third world ahead of the industrialised countries when it comes to efficiency. This is underlined by the fact that microinsurance premium income in Ghana grew from GHS 2.6m (US$ 1.35m) in 2010 to GHS 3.9m (US$ 2m) in 2011, representing a growth rate of about 30%.
Enabling regulatory framework to encourage insurers
Only 4.1% of the 24 million people in Ghana had access to insurance in 2010. Mrs. Nyamikeh Kyiamah, Ghana’s Commissioner of Insurance, underlined the fact that “the NIC is actively spearheading the development of microinsurance in Ghana, particularly through the development of an appropriate regulatory framework for microinsurance products.”
One of the sessions therefore discussed the Ghanaian way of regulating microinsurance and improving access. Instead of adding to the regulatory burdens, the NIC focuses on the one hand on actively engaging with insurance providers. In the proposed insurance code, insurers will be able to designate a contract as a microinsurance product provided it satisfies NIC criteria. The criteria include aspects like affordability or designing and developing a product to address the specific needs of the low-income sector. Insurance products designated as “microinsurance” by the provider will have to be filed with the NIC but may be marketed after a period of four weeks unless the NIC objects to the product. It is also intended that microinsurance policies may be sold by unlicensed insurance agents.
From knowledge to market
To keep pace with the rate of growth, more and better trained staff will be needed in the near future. However, insurance curricula and local training facilities will have to be improved to meet those needs. At the same time, job opportunities for highly qualified insurance experts need to improve locally. Where insurance experts are not available, “actuarial toolkits” have the potential to fill knowledge gaps. Toolkits for life, health and agriculture are currently being developed by the International Actuarial Association in cooperation with British and other international actuaries and will be presented at the 8th International Microinsurance Conference, to be held in November 2012 in Tanzania.
At the same time, insurers need to better understand their customers. The majority of microinsurance clients (65.5%) in Ghana are women according to a GIZ and NIC market survey. More than 70% of microinsurance clients are self-employed with no employees. The income of over 50% of the clients is less than GHS 400 (approx. US$ 210) a month. When asked what insurance is most needed, health comes first, followed by disability.
Furthermore, the results show that trust in insurance providers and a proper understanding of the features of insurance products are key to increasing outreach. The survey revealed that e.g. the tendency to package insurance with other financial services reduces awareness of being insured. Even more worrying, the results of the study inevitably lead to the conclusion that many clients still do not understand the basic principles of insurance.
More learning opportunities welcome
“Learning Sessions” Ghana provided important insights into the main topics discussed at the six anchor sessions and provided an important platform for local participants to learn and network. It also helped create a better understanding of the strategy and role of the NIC in developing the local insurance market and, especially, reaching out to the low-income sector. As with the “Learning Sessions London” that took place in June 2011, the Ghana “Learning Sessions” conference was organised by partners such as GIZ with the support of the Munich Re Foundation and the Microinsurance Network. The number of participants exceeded all expectations, clearly showing the demand there is for such events in markets with low insurance penetration. Together with its partners, the Munich Re Foundation will therefore explore opportunities for organising further learning sessions in 2013.