Focus on Ghana: Insurance policyholders come first

The President of Ghana, Nana Addo Dankwa Akufo-Addo appointed Justice Yaw Ofori as the new Commissioner of the National Insurance Commission of Ghana.

He took over from Lydia Lariba Bawa in September last year. Prior to his appointment, he was the first Director of the Ghana Insurance College for 11 years and also a Senior Manager of Vanguard Assurance Company for two years, bringing an extensive range of experience to his new post. 

What are your priorities in your new role as National Insurance Commissioner?

I took over the role with the aim of creating a level playing field for industry and, most importantly, to make sure the insurance policyholder is well taken care of.  That is what we have been working on since I started.

We try to regulate the conduct of the insurance companies – sometimes, we get involved in the setting of premiums. We are involved in the approval of products so that we make sure of the wording and other things – we don’t take the ordinary person for granted. 

Where policy decisions are involved, sometimes we actually have to advise the Minister of Finance, as we operate under the Minister of Finance.

With over 80 companies operating in the insurance field, is the market oversaturated?

In any field when you see a lot of people coming in, it’s a good sign; it means that it’s a good place to actually do business. Of course, some people don’t like the added competition, especially when it comes to companies coming in from outside the industry.

But to describe the industry as oversaturated is not correct. If you compare the number of active companies in Ghana to Western nations then we probably do have a lot of players in the market.

But as the Commission, we are not here to discriminate. We don’t want to encourage monopolies, whereby we have a few insurance companies and they determine the future of the consumer.

So, we have to strike a balance; and there are rules and regulations that actually regulate the number of people joining the market. As long as they satisfy the requirements, we have no objection to granting them a licence. 

I don’t think it is in our interest to see the numbers come down and anyway, demand and supply will actually decide on whether the number of insurance companies will dwindle or not.  So, we leave it to market forces.

Some companies have complained about aggressive undercutting, especially by the new market entrants. Do you think it is the duty of the Commission to prevent this type of practice?

Yes, we have to do what is right by implementing the 2006 Insurance Act. If people are undercutting, like the companies are claiming, and if the regulator is hard on them, then those firms will sit up and listen.

I think most of those problems are regulatory issues. If we are doing our work well then people will become prepared to sell insurance products at the correct premiums because they know that we will be hard on them when it comes to claims payment. Those who cannot survive might be compelled to maybe team up into one entity instead of having small companies.

One thing we should realise is that while there are a lot of companies in our market, they are small companies. So we shouldn’t just look at it by the number of companies registered but also, the size. The system in Ghana has not developed enough to sustain huge multinationals such as CGU Insurance or Allianz, so the companies are compelled to stay small.

Insurance penetration in Ghana remains low, at around 1.5% compared to 3% in Nigeria and Kenya. What can you as do as a regulator to encourage insurance uptake?

In the first place, the method of calculating market penetration is wrong because in other parts of the world, the figures combine all other forms of insurance. In our part of the world, there is no combination of insurance – only those types we know of: motor insurance, fire, and others. Elsewhere, they include life assurance, pensions, social security and health insurance – which are all forms of insurance. 

You can try to increase penetration, but you will never get to the levels that we want until we consider all these other forms of insurance in our calculations. I believe that if we included life, health and private medical insurance, areas that don’t currently come under the National Insurance Commission, our insurance penetration would probably be around maybe 5% or 6% of GDP.

But is it still possible to increase penetration using the current system of calculation?

First of all, we have to implement the Act to the letter of the law, by making sure that we have a level playing field for all. The Commission should be more proactive than reactive. 

We should create market conditions for the industry; we should be looking at areas like agribusiness insurance, which actually covers about 80% of our population. We should be looking at areas like micro-insurance for low-income people.

In Africa, Ghana has the second highest number of people with insurance – after South Africa. Penetration has only become an issue because our method of calculating excludes the other forms of insurance I mentioned previously.

So, in Ghana, a lot of people are buying insurance but the figures perhaps reflect the concentration of micro-insurance, where premiums are relatively low, compared to commercial insurance. But if we had larger entities, then we would see a big jump in penetration rate.

Over recent years the commission has enacted a series of reforms, such as the ‘No Premium, No Cover’ clause, which requires customers to pay the full policy premium before coverage starts. Has the policy been a success?

‘No Premium, No Cover’ has been a success because now when the insurance companies are talking about the premiums, you know they will cover 100% of the claims they receive.

Previously, while they mentioned their premiums, they also had so much outstanding debt; but now, at least, they have their monies and they can invest. 

It is still, however, a challenge for some people to buy insurance when it’s not compulsory.  When it’s compulsory, they are compelled to buy the cheapest they can get, like third party instead of comprehensive, because of the ‘No premium, No cover’ clause.

So that also affects insurance penetration. For example, someone who buys a brand new car should buy a comprehensive policy but looking at the premium, he might say, “you know what, comprehensive is not compulsory but third party is compulsory; so, let me buy third party just to take care of myself”. And third party now being compulsory, is also very cheap, so the insurance companies are losing because people are not adequately insured. 

One solution we might have to look at is a system whereby we can have monthly deductions, where the premiums are spread over a year, rather than having to be paid in bulk, so that people are adequately insured.

And what about minimum premium rates, have they been a success? 

It has not been a success. We had a premium rate but the insurance companies are always trying to find a way to give discounts due to the strong competition. The discounts lead to undercutting and it affects the customers, who are under-insured because in many instances the policies being sold are not comprehensive enough.

How can you rectify this problem?

I had a meeting with key industry players and I told them, “I don’t see why we should be giving, for example, a no claim discount of 50%”. It only makes sense if you are trying to get around the minimum premium.

I said to them that instead of offering the discount, they should offer another incentive to the customer, such as another form of insurance. So, for example, instead of giving back 50% of the premium, they should put that money towards a life insurance investment – that way the money is recycled. That is a proposal that I have made and we will discuss it and see if they think it is a good idea.

Looking ahead, what are you planning for 2018?

We are planning on bringing out, in the first quarter of the year, new software that is going to store data about all vehicles on the roads and their insurance status. 

We will make it accessible to the public so that even if I’m travelling and I’m going to use public transport, I can check a vehicle’s licences to make sure the vehicle is adequately insured before I put my life at risk. If I have an accident on the road and the other party refuses to give me his insurance particulars, I should be able to key in his driver’s licence so I can get information. 

That is going to help us know how many vehicles we have on the road; how many accidents there are; how long it’s taking for claims to be resolved; all these things will help us actually do our work well.

We are also going to make sure that licence renewals are done on a proactive basis.  Product licensing will be done proactively. I will try to have a lot of interaction with our industry.  We plan to have four meetings with industry – I will meet with key industry players every quarter to see the way forward.  That way, we can address issues before they become problematic. n