By: Samuel Doe. Ablordeppey
The National Insurance Commission is promoting micro-insurance on a large scale as another way to increase the number of people with insurance cover in the country.
The insurance industry regulator is, therefore, hoping to finalise a strategic paper by the end of the year setting out the feasibility, modalities and the legal framework of licensing stand-alone micro-insurance companies.
The Insurance Commissioner and Chief Executive Officer of the NIC, Ms Lydia Lariba Bawa, who disclosed this to the GRAPHIC BUSINESS in an exclusive interview, said their belief in micro-insurance was because of the success it had already chalked, riding at the back of the conventional insurance companies which design micro-insurance policies to meet specific needs of groups.
She was answering questions on what the Commission was doing to increase the number of people in the country with insurance cover, also known as insurance penetration.
Ms Bawa said the micro-insurance companies would be mandated to reach out to the hinterlands and the rural areas, as opposed to the traditional companies which are stuck to urban and peri-urban areas.
This has become necessary because the number of people with one form or another of insurance cover is small, less than two per cent of the population, following a generally low trend in Africa. There are 26 non-life (general business) insurance companies; 23 life companies and three reinsurance companies.
They are supported by 69 insurance broking firms and 6,000 insurance agents, one reinsurance broker and one company dedicated to oil and gas business.
Micro-insurance on the move
Micro-insurance is that type of insurance with low premiums and the policy does not cover a wide range of items. Thus, such insurance policies generate small financial transactions. The policies and the claims procedures are simplified.
Currently in Ghana, some insurance companies are partnering with telecom service providers to provide cover for a number of people.
Using the windows under the traditional insurance companies, micro-insurance currently covers 7.5 million lives. This shows great prospects for that branch of insurance and the NIC plans to complete the strategic paper on it by the close of the year, which would clearly spell out the roadmap and the form it will take.
“Even with the conventional insurance companies, they have covered 7.5 million lives. So you can imagine if we open up and increase the channels by getting to the people in the rural areas,” she said.
The micro-insurance is designed for the underserved and low income people and comes with premiums as small as GH¢1.50 on the average which the conventional insurance companies do not have policies designed to serve.
Currently, insurance companies use a window where they group people in the informal sector and design policies to meet peculiarities. For example, the needs of market women, ‘chop bar’ operators, fishmongers are assessed as a group and policies are designed to cover their lives and/or credit.
“SMEs take loans to support their businesses so the insurance companies design policies to cover the credit so that when they lose their wares or capital in unfortunate events such as flood or fire, they can fall on the insurance cover to survive,” Ms Bawa explained.
Community based
However, when the framework for licensing the stand-alone companies become operational, it will come in the form of mutual insurance where the people in rural communities will themselves form mutual insurance groups with leaders who will sell the policies and help them access claims when they fall due.
According to the insurance commissioner, the premiums in this category would be low, with the policies and procedure for making claims simplified so as to encourage adoption, rather than scaring them.
The NIC is currently understudying similar systems in India, the Philippines and other markets where micro-insurance has taken root to guide it to prepare the legal framework to promote micro-insurance.
Ms Bawa said the Commission was also learning lessons from recent challenges in microfinance in order to come out with a rigorous framework from the outset.
Takaful insurance
The Commission is also taking a keen look at implementing Takaful insurance, which is designed for the Islamic community in the country. Also referred to as Family Takaful, it is a contract that protects individuals against financial losses resulting from death.
In the case of family Takaful, the loss or death of a person, comes with financial burden on the family of the deceased. Takaful, therefore, helps to share the risk with the insured, by allowing members to participate in a scheme to share the risk and help ease the burden on the family, in the event of a member’s death.
Neighbouring Nigeria has just rolled out Takaful insurance which could be a reference for Ghana. Ms Bawa said although Ghana’s Islamic population was not as large as Nigeria’s, it could still catch on locally.
To share the risks, each member contributes a defined amount for a period and for a defined benefit or cover. Age limits are also defined.
Even with the conventional insurance companies, they have covered 7.5 million lives. So you can imagine if we open up and increase the channels by getting to the people in the rural areas.
Key Note
The National Insurance Commission is working towards establishing a legal framework for licensing stand-alone micro-insurance companies in a bid to deepen insurance penetration in the country.
the Commission was doing to increase the number of people in the country with insurance cover, also known as insurance penetration.
Ms Bawa said the micro-insurance companies would be mandated to reach out to the hinterlands and the rural areas, as opposed to the traditional companies which are stuck to urban and peri-urban areas.
This has become necessary because the number of people with one form or another of insurance cover is small, less than two per cent of the population, following a generally low trend in Africa. There are 26 non-life (general business) insurance companies; 23 life companies and three reinsurance companies.
They are supported by 69 insurance broking firms and 6,000 insurance agents, one reinsurance broker and one company dedicated to oil and gas business.
Micro-insurance on the move
Micro-insurance is that type of insurance with low premiums and the policy does not cover a wide range of items. Thus, such insurance policies generate small financial transactions. The policies and the claims procedures are simplified.
Currently in Ghana, some insurance companies are partnering with telecom service providers to provide cover for a number of people.
Using the windows under the traditional insurance companies, micro-insurance currently covers 7.5 million lives. This shows great prospects for that branch of insurance and the NIC plans to complete the strategic paper on it by the close of the year, which would clearly spell out the roadmap and the form it will take.
“Even with the conventional insurance companies, they have covered 7.5 million lives. So you can imagine if we open up and increase the channels by getting to the people in the rural areas,” she said.
The micro-insurance is designed for the underserved and low income people and comes with premiums as small as GH¢1.50 on the average which the conventional insurance companies do not have policies designed to serve.
Currently, insurance companies use a window where they group people in the informal sector and design policies to meet peculiarities. For example, the needs of market women, ‘chop bar’ operators, fishmongers are assessed as a group and policies are designed to cover their lives and/or credit.
“SMEs take loans to support their businesses so the insurance companies design policies to cover the credit so that when they lose their wares or capital in unfortunate events such as flood or fire, they can fall on the insurance cover to survive,” Ms Bawa explained.
Community based
However, when the framework for licensing the stand-alone companies become operational, it will come in the form of mutual insurance where the people in rural communities will themselves form mutual insurance groups with leaders who will sell the policies and help them access claims when they fall due.
According to the insurance commissioner, the premiums in this category would be low, with the policies and procedure for making claims simplified so as to encourage adoption, rather than scaring them.
The NIC is currently understudying similar systems in India, the Philippines and other markets where micro-insurance has taken root to guide it to prepare the legal framework to promote micro-insurance.
Ms Bawa said the Commission was also learning lessons from recent challenges in microfinance in order to come out with a rigorous framework from the outset.
Takaful insurance
The Commission is also taking a keen look at implementing Takaful insurance, which is designed for the Islamic community in the country. Also referred to as Family Takaful, it is a contract that protects individuals against financial losses resulting from death.
In the case of family Takaful, the loss or death of a person, comes with financial burden on the family of the deceased. Takaful, therefore, helps to share the risk with the insured, by allowing members to participate in a scheme to share the risk and help ease the burden on the family, in the event of a member’s death.
Neighbouring Nigeria has just rolled out Takaful insurance which could be a reference for Ghana. Ms Bawa said although Ghana’s Islamic population was not as large as Nigeria’s, it could still catch on locally.
To share the risks, each member contributes a defined amount for a period and for a defined benefit or cover. Age limits are also defined.
Graphic Online
