Lack of Trust In Ghana’s Insurance Industry; The Role of the Major Stakeholders

Insurance plays a critical role in the economy of any nation, be it life insurance, property insurance or health insurance. It offers a safety net that helps people recover from unexpected losses. Yet in Ghana, insurance uptake is alarmingly low with penetration rates around 1-2% according to the Oxford Business Group. While lack of transparency in pricing and low awareness play a role in the low penetration rate, one of the major obstacles is lack of trust.

Why Lack of Trust?

For many Ghanaians, insurance is seen as a gamble, where you must choose between the insured event occurring for you to make a claim, or giving out money for ‘free” as premiums.

Information gap has led people to think that insurers are quick to charge premiums but will find reasons not to pay claims. The low literacy rate in Ghana could be a driving force behind the information gap as people will rather go with stories they have heard than to research for themselves.

Misunderstanding of policyholder responsibilities as well as some insurers’ deliberate attempt to avoid paying claims has also contributed to the lack of trust in the industry. Complicated contracts written with technical jargon seek to mask the real responsibilities of policyholders. Many policyholders admit they don’t fully understand the terms of their policies until it is too late.

Is Insurance Really a Scam?

This question has been on the lips of many Ghanaians. The main purpose of insurance is to provide a safety net in the event of losses. There are 3 main types, Life Insurance, Accident and Health and Property & Casualty Insurance. Other lesser-known ones exist depending on the need for them.

Life insurance offers a lump sum payment on the death of the policyholder in exchange for periodic payments, called Premiums. These premium payments usually are as long as the policyholder lives but there are rare instances where other types exist.

Accident and Health Insurance pays all or part of any hospital bills incurred by the policyholder through sickness or accident. The terms of the coverage are determined by the contract and may not cover every type of sickness. These are usually purchased through employers, but there are private options that individuals can opt for. The National Health Insurance Scheme (NHIS) is an example of this type of insurance.

Property & Casualty offers a reimbursement, usually at market value, of properties in the event of loss. The degree of reimbursement usually depends on the coverage the policyholder goes for. Auto insurance is an example of this type of insurance.

In Ghana, the regulatory body providing oversight over the insurance sector is the National Insurance Commission (NIC). According to the NIC, the sector currently has 49 insurance providers, 29 non-life and 20 life insurance providers. There are also 3 reinsurers.

The above information goes to show that the low level of insurance penetration rates is not particularly due to the lack of insurers, but rather, something else. How do we change the narrative that Insurance is a scam?

The Role of Stakeholders in changing this narrative

Various stakeholders have different roles they play in ensuring that insurance in Ghana reaches everybody. Below, we will look at some stakeholders and how they can help increase the trust in the industry.

• Regulators. Strict punishments such as revocation of licenses for companies who deliberately try to avoid meeting their obligations to policyholders. They should also ensure policyholders have clear avenues for redress when dispute arises with insurers. Also, publicly communicating these efforts is vital to building trust.
• Agents should simplify complex insurance terms and explain policy terms more clearly to the potential buyers. They should also avoid making promises that are clearly not covered by the policy. They can also guide policyholders through the claims process to ensure smooth experiences. They should act as trusted advisors rather than just salespeople.
• Insurers should draft policies in plain language and avoid hidden clauses that seeks to avoid meeting their obligations. Setting up an accountability metric such as publishing their average claim settlement times, can help build credibility in the market. They can also leverage technology to speed up policy buying. Since higher penetration rates also benefit the insurers, they can organize education for the public, educating them on the benefits of insurance and how they can participate.
• The Public should also play their part by taking their time to ask questions and understand policies before buying. They can also report unethical practices or unfair treatment to the regulators or report unscrupulous agents to the insurers. Sharing their positive experiences with others to help build trust in the industry is also beneficial.

The Way Forward

Restoring trust in Ghana’s insurance industry will not happen overnight, but the path forward is clear. The various stakeholders must do their part; regulators must continue holding firms accountable, insurers must prioritize transparency and simplify the policy documents for easy understanding. Agents must build genuine connections with clients and not just for the commissions. The public must also be open minded and not see insurance as just a gamble or a means to enrich themselves but rather a critical safeguard against unforeseen losses.

Emmanuel Awotwe, a graduate from the University of Wisconsin Milwaukee and an Associate of the Society of Actuaries.

References

Oxford Business Group (2022). What is Ghana Doing to Broaden its Insurance Penetration? Oxford Business Group https://oxfordbusinessgroup.com/reports/ghana/2022-report/economy/expand-the-base-regulatory-reforms-and-the-introduction-of-new-products-and-technologies-are-broadening-insurance-penetration

The National Insurance Commission. https://nicgh.org/insurers-reinsurers/life-companies/