Insurance penetration still low - Ag. Commissioner NIC

The country’s insurance industry has evolved over the years with gross premiums increasing about tenfold from GH¢458 million in 2010 to GH¢6.6 billion in 2022.

However, the insurance penetration rate in the country is still below two per cent with more than 75 per cent of Ghanaians, representing about 25 million people, being uninsured.

The Daily Graphic’s reporter, Maclean Kwofi (MK), had a chat with the Ag. Commissioner of the National Insurance Commission (NIC), Michael Andoh (MA), on measures being deployed to correct that shortfall and further grow the industry.

MACLEAN Kwofi (MK): Can you provide a brief overview of the current regulatory framework for insurance in Ghana and any recent or upcoming changes or reforms?

Michael Andoh  (MA): The NIC was established under Insurance Law 1989 (PNDC Law 227), but now operates under Insurance Act, 2021 (Act 1061). The object of the commission, as detailed in Act 1061, is to ensure effective administration, supervision, regulation and control of the business of insurance in the country.

NIC is mandated to perform a wide spectrum of functions, including licensing of entities, setting of standards and facilitating the setting of codes for practitioners.

The regulator is also mandated to approve rates of insurance premiums and commissions, provide a bureau for the resolution of complaints and arbitrate insurance claims when disputes arise.

Other responsibilities include the provision of recommendation to the sector minister for policy formulation, supervision of practitioners, enforcement of compliance and public education.

The development of strong relationships with regulators from other countries and international bodies such as ensuring the conformity of practitioners to internationally accepted standards are also key mandates of the commission.

The enactment of Act 1061 was a major milestone towards a robust insurance regulatory environment, as it empowers and grants adequate powers to the commission. Together with several other initiatives in the past decade, the new law provides a strong regulatory framework for Ghana’s insurance industry.

Growth

MK: How is the insurance industry faring in 2023?

MA: The insurance industry has been doing quite well in recent times. It is now made up of 28 non-life companies, 20 life companies, three reinsurance companies, 118 broking firms and 5,000 agents across the country.

The Insurance Act which regulates the industry provides the NIC with a supervisory oversight for the life and non-life business, leaving health insurance to the National Health Insurance Authority (NIA) and pensions to the National Pensions Regulatory Authority (NPRA).

The industry in terms of total assets was about GH¢13.6 billion at the end of 2022, with life contributing GH¢6.7 billion, non-life bringing in GH¢5.5 billion, while reinsurance offered GH¢1.1 billion.

Gross premium has also jumped more than tenfold from GH¢458 million in 2010 to GH¢6.6 billion in 2022. It was made up of GH¢3.5 billion for life and GH¢3.1 billion for non-life insurance.

MK: What has been the growth rate of the industry, and which segment of the business has contributed significantly to the numbers?

MA: The industry has been growing about two to five per cent per annum in the last 10 years. But motor and life insurance have become a major contributor to the growth.

The performance of motor insurance can be attributed to the motor insurance database (MID), which has seen the issuance of more than 4.4 million insurance stickers to vehicles. This represents a 25 per cent increase over the number of all insured vehicles on the country’s roads between January 2020 and now.

The objective of the introduction of the MID is to curb the menace of vehicles with fake motor insurance stickers plying our roads, thus endangering lives and property.

Since being introduced on January 1, 2020, the platform is helping to ensure compliance of the law and reduction of undercutting.

Life insurance, on the other hand, has overtaken non-life insurance. We believe that the Act 724, which has been replaced by the new Act prohibited composite companies and separated life insurance firms from non-life companies and so the dedication of resources to life insurance also contributed significantly to the growth.

We also think that the trend could be attributed to the significant improvement in the economy over the years. In most advanced economies, life insurance is bigger than the non-life and so I think our growth curve is normal.

Size

MK: Can you give us a brief explanation on how the size of the industry is measured?

MA: There are two factors to consider when measuring the actual size of the insurance industry and its significance to national output.

The first is the penetration rate, which is the percentage of gross domestic product (GDP) that the industry contributes in terms of gross premium.

And the other is the coverage, which refers to the percentage of the population that have insurance services.

So, because the majority of people are low-income earners in Ghana, even though the coverage has gone up significantly to 44.6 per cent, the penetration rate is still low.

MK: What would you say is the current penetration rate and how has it grown over the last seven years? 

MA: The current insurance penetration is about 1.16 per cent, but we have instituted a number of measures, including insurance education, to get people to understand and appreciate insurance in order to boost effective demand.

It is not just enough for people to hear about insurance; they need to also appreciate its use and benefits.

So, there are diverse things we have been doing to improve insurance education on radio, television and newspapers. We also have market education through an initiative dubbed micro and small businesses clinic.

Our industry is still considered small compared to other countries but we aspire to grow further by developing measures that can correct the anomaly.

Some of the measures to shore up market development and improve financial resilience of regulated entities include risk-based supervision, a forward-looking supervision model that seeks to evaluate the risk profile of regulated entities and prioritise cash supervisory resources on entities with high-risk profiles, as well as the risk that poses the most threat to financial stability.

With these measures, we are highly optimistic of increased insurance penetration in the coming years.

Challenges

MK: What are the key challenges facing the insurance industry in Ghana today, and what steps are being taken to address them?

MA: Just like any other industry or sector, the insurance industry is also facing a number of challenges which the NIC is putting measures in place to resolve.

For instance, the law stipulates that all imports with the exception of personal effects must be insured but our marine business is still not doing well, which simply means there is a big challenge.

And so, we have been collaborating with relevant stakeholders to improve the business by getting importers to comply.

We thought that it was better to use the collaboration approach than to use force to push that segment of the law.

To that end, we have started collaborating with the Ghana Shippers’ Authority (GSA), Ghana Revenue Authority (GRA), Ghana Insurers Association (GIA) and other trade associations such as the Ghana Union of Traders Association (GUTA) and Ghana Institute of Freight Forwarders (GIFF).

The collaboration is to help get the public to comply in order to boost marine insurance in the country. A memorandum of understanding (MoU) to help coordinate and collaborate has subsequently been signed.

The NIC has also built a marine insurance database to help keep track of marine policies.

Majority of our people operate in the agricultural sector, making it a major contributor to our gross domestic product (GDP) but the insurance support for the sector has not been at the level we expect.

The new Insurance Act has created an agriculture fund to help boost agricultural insurance delivery in the country.

The NIC is making an effort to raise capital for the fund to be efficient and support the industry.

The insurance industry has made a substantial contribution, but we are waiting on other stakeholders such as the Ministry of Finance (MoF), Ministry of Food and Agriculture (MoFA), development partners and agriculture value chain actors.

We need to boost agricultural productivity to ensure food security, adequate raw materials and to be able to control migration to the urban centres.

MK: Finally, can you tell us how the insurance industry is faring after the debt exchange programme?

MA: The industry is doing quite well after the DEP; our biggest fear was liquidity but thankfully the bond market has picked up and has not been as bad as we thought and so you can see the insurance firms are still paying claims, and have not collapsed.
Yes, the insurance firms took some kind of knocks as a result of the DEP but the industry has been resilient and it is still functioning appreciably well.