Ahead of the promulgation of a new Insurance Law by Parliament which will, among other things provide a comprehensive framework for micro-insurance in Ghana, insurance underwriters are increasingly turning to the country’s mobile telecoms network operators to distribute their products.
Even before the new key legislation is passed, the industry regulator, the National Insurance Commission has been heavily promoting micro-insurance which the industry sees as a potential game changer in a country where the insurance penetration rate is still a low two percent. In the meantime, the NIC is using its Micro-Insurance Market Conduct Rules, put in place in 2013 to regulate this new area of activity. Under these regulations, a company is not allowed to market or renew a micro-insurance product unless it has been licensed by the NIC. Contracts cannot be designated as micro-insurance unless they meet particular criteria, requiring them to be affordable and straightforward.
However the emergence of a thriving micro-insurance market, has presented a challenge for the insurance industry in Ghana, which now needs to distribute low-value, high volume insurance products to a low end market segment nationwide. A survey conducted by the German development agency, GIZ, reveals that the micro-insurance customer market comprises largely of self-employed women between the ages of 30 and 39. Nearly 60 percent of customers earn an average monthly income of below GHc600, showing that micro-insurance has the potential to attract a whole new, but highly fragmented nationwide market for insurance cover.
To reach this market, micro-insurers are developing innovative new distribution channels outside of the brokerage and agent sales that dominant for traditional insurance policies. Here, the leading distribution channel that has emerged is the use of partnerships with telecoms companies. The two biggest networks – MTN and AirtelTigo now offer micro-insurance policies in conjunction with their mobile voice and data packages.
For instance in the first half of 2018 MTN Ghana partnered MMI Holdings to launch aYo, which provides insurance cover for funds sent by MTN Mobile Money. The scheme also enables subscribers to buy a life insurance policy with coverage up to GHc3,000 and hospitalization coverage up to GHc50 per night. Similarly, AirtelTigo offers a scheme that provides both life cover of GHc1,500 and GHc30 per night hospitalization cover. In both schemes, premiums are simply deducted from the value of call time credit recharges once a month, these being so small that most users do not feel the deductions.
To be sure several other distribution channels are emerging too such as bancassurance, involving partnerships between insurers and banks, as well as automated call centres, churches and partnerships with funeral homes.
As more data is gathered, distribution channels will increase and become more efficient, but here too the telecom companies are best positioned as partners to micro-insurers since they have the best access to mass-market data and the capacity to use data analytics to determine the size and structure of emergent markets as well as actual access to those markets.