'Improve Insurance Industry'

JOSEPHINE AMOAH, Chief Executive Officer of the National Insurance Commission, has called for the facilitation of a comprehensive economic development programme that will hasten the alleviation of poverty in West Africa.

“The financial systems must be made more inclusive by improving access to savings, credit and insurances services to the poor,” she said, adding that the contribution of insurance industry to the Gross Domestic Product (GDP) of countries in West and East Africa is low because the majority of people have no regular income and have no access to the regular financial services.

Amoah, who presented a paper on "The Implementation of Micro-insurance: The Role and Perspective of The Supervisory Authority" at a conference in Lagos, stated that the best way to reach out to these people is to use appropriate micro-insurance mechanisms. The conference was organised by the West African Insurance Companies Association (WAICA).

She pointed out that available statistics as contained in the Swiss Re sigma Report of 2007 indicate that the contribution of insurance to GDP is very low in most Sub Saharan African countries as insurance penetration level in Ghana was just about 1.6 percent, Nigeria 0.64 percent, and Kenya 2.47 percent.

"The contribution of insurance industry to the Gross Domestic Product (GDP) of countries in sub-Saharan Africa is low because most of the people operate in the informal sector as petty traders, artisans, subsistence farmers fishermen etc. Such people, who ironically happen to be the majority, usually have low education, low and irregular income and therefore do not have access to the regular financial services. The only way to reach out to these people is to use appropriate micro-insurance mechanisms," Amoah noted.

She added: "Related to the above is the fact that the financial services industry is overly exclusive, probably due to the reasons given above. In order to facilitate economic development and alleviate poverty, the financial systems must be made more inclusive by improving access to savings, credit and insurances services to the poor."

Amoah also lamented that "one major cause of poverty in Sub Saharan Africa is the fact that low income households and markets do not have the same opportunities to finance investments (credit), accumulate capital (save) and protect their assets (insure). The poor therefore rely heavily on informal financial services such as money lenders, under-the-mattress savings and community based credit societies which can be inefficient, expensive and may even end up worsening their poverty situation."

In view of this precarious situation, she emphasised the need for concerted efforts to develop micro-insurance in the West African economic context.

From Business Desk