Are Ghana's Insurance Players Fighting Over the Same Customers Instead of Growing the Market?

Perhaps the most important question facing Ghana's insurance distribution system is whether the industry is spending too much energy competing for existing policyholders instead of expanding insurance coverage.

Consider a situation where a business obtains its insurance directly from an insurance company. At the next renewal, an insurance broker approaches the same business, promises better service and transfers the policy to another insurer. A year later, an insurance agent approaches that customer with a different quotation and persuades the business to move again.

The customer remains insured, but the distribution channel and insurance provider have changed.

Such movements are not inherently wrong. Customers have the right to seek better prices, improved coverage and superior service. Brokers and agents also have legitimate commercial reasons to compete for business.

However, when this becomes a dominant feature of the market, an important question emerges: how much of the industry's commercial activity is generating new insurance coverage, and how much is simply redistributing existing business?

This question becomes even more significant when considered against Ghana's low insurance penetration.

The Bank of Ghana's 2024 Financial Stability Review and Accra Street Journal reported insurance penetration of 1.0 per cent based on gross premiums, while the IFRS 17 insurance service revenue measure stood at 0.63 per cent.

Ghana therefore has a substantial insurance inclusion challenge.

The industry needs to reach more households, small businesses, traders, farmers, transport operators and other economic participants who remain outside formal insurance protection.

If brokers, agents and insurers are repeatedly approaching the same pool of already-insured customers, the NIC should examine whether the present distribution model is producing sufficient market expansion.

There is also a fundamental commercial question concerning the role of the broker.

An insurance company can sell its products directly, provide quotations, administer policies and manage claims. A broker, meanwhile, earns commission or other compensation for arranging insurance business and is expected to provide independent advice and represent the interests of the insured.

The broker must therefore demonstrate a clear additional value to justify the intermediary relationship.

This may include independent comparisons across insurers, risk assessment, negotiation of policy terms, claims support and ongoing risk management.

But where customers cannot distinguish these services from what insurers already provide, the commercial justification for the brokerage relationship becomes less obvious.

The NIC should therefore examine whether Ghana's insurance distribution structure is encouraging meaningful specialisation or merely creating several competing channels for the acquisition of the same customers.

The Commission should commission a study examining policy movements, broker appointments, agent distribution, direct insurance sales, renewal transfers and the actual contribution of each channel to new insurance coverage.

The objective should not be to prevent legitimate competition or restrict customers from changing their insurers.

Rather, it should be to ensure that competition contributes to a larger, more inclusive insurance market instead of becoming an expensive struggle over a relatively small pool of existing policyholders.

Ghana needs more insured people and businesses, not merely more competition over the same policyholders.

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Source Used: Accra Street Journal