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Improving Ghana’s Insurance Industry for national development   
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The proliferation of insurance companies in Ghana recently, seems to be an opportunity for provident individuals and groups to contribute moneys to various schemes towards a planned and secured future.

No wonder some of these companies manage to woo their clients to even contribute towards their burial and funeral, after making much gains in the areas of education, health and other calamities or disasters including fire outbreaks, burglary, accidents and floods.

Patronage is improving astonishingly and agents of insurance companies keep on invading work places, markets, religious organizations and schools, like swarms of bees, in a bid to capture more clients.

Some insurance products, especially those from the Life Businesses, have been so ingeniously fashioned to mimic day-to-day banking or other forms of investment in the financial sector such that it is difficult to resist their appeal.

Besides, a policyholder could enjoy another benefit from an insurance product and “The insured person can get loans against the security of insurance policy from an insurance company or from banks,” says Mr. Akwasi Boakye, a Marketing Representative of Donewell Life Company.

The penetration of the market by insurance companies would perhaps deepen with the enactment of the National Pensions Act, 2008(ACT 766) into law, with its mandatory three-tier contributory pension scheme.

The main objective of the three-tier scheme is to provide for pension benefits that will ensure retirement income security for the worker.

The first tier basic national social security scheme, which incorporates improved Social Security and National Insurance Trust (SSNIT) benefits, is mandatory for all employees in both the private and public sectors.

The second tier occupational pension scheme, which is mandatory for all employees but managed privately, has been fashioned to give higher lump-sum benefits for contributors that are higher than that made available either by SSNIT or under the CAP 30.

As for the third, it is a voluntary provident fund and personal pension scheme, which is supported by tax benefit incentives for workers in the formal sector who want to make voluntary contributions to enhance their pension benefits and for workers in the informal sector.

The employer will make a monthly contribution of 13 per cent of a worker’s salary whilst the worker will make a contribution of five-and-a-half per cent making it a total of 18-and-a-half per cent of workers salary as mandatory contribution towards the pension.

Out of the total contribution of 18-and-half per cent, the employer will remit 13 and half percent to the first tier mandatory basic national security scheme and five percent to the mandatory second tier occupational pension scheme.

Contributions made to the third voluntary tier have no fixed level, as the contributions would depend on the individual’s ability to pay.

Insurance companies would especially be interested in the prospects that both the second and third tiers make available in the market and they are expected to cash in on such opportunity.

At the launch of the new pension scheme in Accra, President John Atta Mills expressed the hope that Ghanaian workers could now look up to retirement with optimism. “Pensioners should be hopeful that a new dawn has come to take adequate care of them and their dependents in their old age,” he said.

If Ghanaian workers are to benefit immensely from insurance products, especially at pension when they might find it difficult to cater for themselves and their dependents, there is then the need to remove certain roadblocks to the growth of industry in the country in order to give it a facelift.

Despite the numerous advantages, the industry is beleaguered with setbacks that should be addressed to enable it to contribute more meaningfully to national development.

Information has become a powerful tool in modern development, and insurance companies would have to ensure constant flow of details about their operations through the media to build confidence in clients.

Presently, there is a general feeling of apathy and prejudice of insurance companies and their operations in the country.

To address this challenge, insurance agents and marketers needs to be trained in such a way that the terms and conditions in policy documents would be well explained in order for clients to make informed decisions. This will ensure transparency in the activities of insurance companies and engender trust in clients.

Another challenge found as a debilitating illness in the industry is the issue of price undercutting where premiums below the feasible market rates are quoted. This tactic, used by some marketers, poses a risk that creates unhealthy competition in the industry.

"Insurance practice in the country has now become like selling tomatoes at the marketplace where the buyer tells you, I will give for example GH˘20 and then the insurer says okay I will accept GH˘10," Mr. Ebenezer Allotey, Managing Director of Prime Insurance Company Limited, a private company, told the Ghana News Agency in an interview.

To check this, a proper and proactive regulatory regime needs to be institutionalised to ensure companies charge the minimum-required rate. Happily, the National Insurance Commission is empowered by the new Insurance Act 2006, Act 724 to check the anomaly. The Act makes provision for regular on-site inspection, licensing and appropriate sanctions against defaulting companies.

Another identified challenge has to do with delays in claim payments. “When they (insurance operators) need you to take a policy with them, they tell you all sorts of sugar-coated things. When it comes to paying the claims they promised, it turns out to be totally different as they show you certain clauses, terms, conditions and limitations that are hidden in fine prints to the policy holder.” This is a common observation made by many a disgruntled person whose claims have been repudiated by insurance companies.

Indeed, some claims are fraudulently made and a survey conducted recently by the International Insurance Associations puts the level of detected and suspected fraud in insurance claims between five to 10 per cent each day.

Commenting on the situation, Mr. Gabriel Glover, Executive Secretary of Ghana Insurers Association (GIA), says "Using our claims cost figure of 100,000 per working day, we are looking at a fraud cost of between GH˘5,000 and GH˘10,000 a day".

While it is necessary to subject claimants to proper document verification and queries to clamp down on such fraudulent claims, excessive or unnecessary long bureaucratic procedures and bottlenecks need to be discouraged during claim payments.

Availability and easy access to accurate statistics on the Ghanaian market remains a challenge to the insurance sector. Speaking on the issue, Mr. Ivan Avereyireh, Managing Director of the Ghana Life Insurance Company, said “There is no current information in the industry to help professionals to work to make good policies and address the needs of everybody. When you have good information, you will bring out good policies and formulate effective policies.”

Government and private sector participation can ensure easy access to credible statistics that would enable insurance companies to design comprehensive policies to meet the needs of prospective clients.

How to manage risk effectively has become a priority for insurance companies as the scale of frequency of disaster and other uncertainties rise with the passage of time.

Meeting future claim payments and obligations remain an overwhelming task that requires equal attention, as is managing the reputation of insurance entities to restore consumer and regulatory confidence.

The role of the media in the reformation of the insurance industry cannot be overemphasized. At a press soiree to sensitize the journalists on this year’s Insurance Awareness Month, Mr. Benjamin Acolatse, President-elect of the Ghana Insurers Association (GIA), acknowledged the unavoidable role of the Media in the development of issuance companies.

He said, “We recognize the media as partners in educating the general public on the need to insure your life or property, and it is against this backdrop that we find it necessary to brief you well about the month-long Insurance Awareness activities.”

The insurance industry in the country has a huge potential, which has barely been scratched. Prospects in the Life Businesses are yet to be fully tapped and the petro-chemical industry is rife with the recent discovery of oil in commercial quantities.

Insurance companies should invest in research into the progress, problems and prospects of the insurance industry.

This would assist insurance managers and brokers to formulate and implement comprehensive policies to satisfy the demands of clients and for the development and survival of the industry.

Undisputably, the insurance industry is making efforts at supporting the socio-economic development of the country, amidst numerous challenges.

It behoves managers of the industry to create a more firm and favourable platform to enable individuals, groups and government to meaningfully contribute to the improvement and sustenance of the sector towards national development.

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