With insurance penetration as a percentage to GDP in Ghana at below at 1.85% at the end of Q1 2016, according to Africa Insurance Organisation statistics from 2014, there is general consensus the sector is underperforming. A key reason for this is the ignoring of the majority of the country's workforce - the informal sector, which is put off by expensive premiums and complex underwriting processes.
A recent Lloyds 360 risk insight study "Exploring opportunities in microinsurance" identified the low-income segment as a potential market of effective consumers for financial services, as long as appropriate products, processes and education are provided. It went on to note that the simplicity of said products, procedures and policies, low premiums, efficient administration and innovative distribution channels render microinsurance effective even in markets with little to no insurance experience.
Data from the World Map of Microinsurance indicates that over 7.6 million lives are now covered by at least one microinsurance policy, however coverage to poor farmers, traders, casual workers in rural areas has proven difficult in urban-centric Ghana. The excessive reliance on intermediary brokers and traditional sales agents has severely limited this delivery to rural areas. Thus, strategic delivery models are key, as Network member Roland Steinmann of the MicroInsurance Centre outlined:
"Good products, marketing and financial literacy of clients are prerequisites but delivery is the key to turning microinsurance potential into a real business hence the need for Ghanaian insurers to reconsider distribution and device-innovative models to ensure that needed expansion."
An example of innovative microinsurance innovation is Hollard's undertaking with PEP retail stores in South Africa, which collaborate to the delivery of low-cost insurance policies to its clients.
Mass penetration can therefore likely be achieved in Ghana, especially if National Insurance Commissioner, Lydia Lariba Bawa's call for NGOs operating in rural areas to register for licensing, and vow to license said organisations so that they can reach the rural, low-income population, is honoured to ensure that involvement and collaboration between sectors further expands microinsurance in the country, hence contributing to wealth creation and reducing poverty.
The information for this blog is derived from an article from Business World Ghana.
Hugo Fulco is the Communications Officer at the Microinsurance Network.