Increasing Ghana’s insurance penetration

The National Insurance Commission in collaboration with the associations of both primary insurance companies and insurance brokerages are preparing to implement the second stage of an intense sensitization programme aimed at enlightening the general public at the grassroots level nationwide on the benefits of taking insurance cover, how it works and how it can be accessed. The programme has been well designed for this purpose; it will use the local FM radio stations that are most popular in the areas being targeted and will be done in the various local languages that form the predominant forms of communications in those places.

Pessimists will argue that even the best designed marketing effort cannot produce significantly improved sales if the products on offer do not meet the specific requirements of the targeted buyers and in this, they are right. Indeed, most formal insurance products hold little attraction to Ghanaians at the grassroots level, although this is not particularly because of shortcomings on the part of the insurers themselves. Rather, it is the combination of lack of disposable income, which puts insurance far down their list of priorities, and relatively high inflation, which erodes the value of long term financial contracts that are primarily to blame.

Coupled with the laid back attitude of Ghana’s insurance industry towards marketing its offerings, these have led to this country having one of the lowest insurance penetration rates to be found anywhere in the world.

However, the impending introduction of formal regulatory and facilitation frameworks for both micro-insurance and agricultural insurance hold the potential to change this situation.

Basically, impending micro-insurance stands to take insurance to the grassroots in the same way as the micro-finance industry has taken financial intermediation over the past seven years or so. Of course, much better corporate governance will be required from micro-insurers than what the micro-finance institutions have provided, but expectedly, insurance regulators should have learnt invaluable lessons from the shortcomings of the troubled microfinance industry.

Agricultural insurance holds similar promise since it aims at the economic sector that employs the most Ghanaians, many of whom are small-holder farmers.

Interestingly, while neither micro-insurance nor agricultural insurance will be priorities for their targeted policy holders, on their own accord, they will have a crucial selling point – by ameliorating the risks incurred by lenders, they will significantly improve the prospects of policy holders to secure credit financing for their respective enterprises. Since the target markets for both comprise entrepreneurs and self employed people who direly need loan financing but find it extremely difficult to secure such credit, the taking of micro or agricultural insurance can be presented as a key step towards obtaining such loan finance. This would make such insurance policies so much more important and potentially beneficial to those who are meant to take them up.

However, while all this is well and good, there is the need for better enforcement of the laws concerning the uptake of traditional, larger scale insurance by the formal sector resident in urban areas. Rural entrepreneurs and self employed people at the grassroots level would be understandably suspicious of the micro insurance and agricultural insurance policies they are being offered if they are aware  that their bigger, more enlightened counterparts in the urban centres are defying the various laws that compel them to take compulsory insurance for their motor vehicles, for their commercial buildings (against fire and allied perils as well as third party liability) and for their imports, which the law demands are insured locally, but which too often are insured abroad in defiance of the law.

Charity begins at home goes the age old adage. So even as Ghana’s insurance industry begins its nationwide, grassroots level sensitization initiative, armed with insurance products that are very relevant to the needs of their targets, they should be able to hold up good examples of proper behavior from their supposedly enlightened and financially empowered urban counterparts.