By: Anthony Sedzro
Ghanaian insurance companies have been advised to design insurance products targeted at millennials if they are to remain profitable in the foreseeable future.
Millennials (young people between the ages of 18-34 according to Pew Research) should be the focus of insurance companies if those companies want to remain in business. Also, it is the surest way of increasing Ghana’s poor insurance penetration rate.
That is the view of Tom Gitogo, the Group Chief Executive Officer (CEO) of CIC Insurance Group, one of the largest insurance companies in Nairobi, Kenya. Gitogo was speaking on the theme “Extending coverage of life insurance in Ghana: A collective responsibility” at the 4th National Life Insurance conference organised by the National Insurers Association (NIA) where he was the main speaker.
The conference took place at the Movenpick Ambassador Hotel, Accra on 11th April and it brought together stakeholders in the industry to deliberate on the challenges and ways of increasing insurance penetration in the country. The conference also had various panel discussion sessions featuring key themes affecting the insurance industry.
Many of Ghana’s life and non-life insurers fixedly target the older population, Gitogo says, and it is time they panned focus to the segment that is the largest, the young people.
“…We are not tapping into them [millennials] for their ideas, their dreams for the future…we need to guide their raw energy with our experience, but we must tap into them or, otherwise, we perish,” the CIC CEO said with a note of warning.
He further explained that the proliferation of mobile phones, tablets and social media means that millennials can be reached through digital means and not the traditional model of brick-and-mortar offices.Therefore, the success of risk underwriters depends on millennials and these millennials only want to interact with underwriters through digital means.
“They are active all the time…it is nice to put up new offices but, millennials don’t ask to visit your office, they first visit your website, they go onto Facebook, Twitter and all these things to see what people are saying about you.”
Gitogo continues: “Now social media does not open at…is it 8:30am [when insurance companies start work] in this country? The social media platform, or your website, is open all the time, so, as they [millennials] leave the bar at 3am in the morning, maybe that is when they knock on your doors. When did you last, as a CEO, look at the appropriateness of your website?”Gitogo, who formerly worked for British American Insurance, challenged the executives present.
Drawing a comparison between Kenya and Ghana, the CEO of CIC said, although insurance penetration in Kenya is 3 percent (higher than Ghana’s rate of less than 1.5 percent)these low percentage increases are even regulatory-driven.
“…The reason why life insurance coverage is higher than non-life in African countries is because most of it is compulsory, like motor insurance, asset financing, and so on…,” he argues.
The low penetration rates, therefore, presents huge opportunities for both countries to exploit, the CIC boss adds.
The Kenyan revealed that 12 years ago, the following technology companies did not exist: Uber (worth US$60 billion); WhatsApp (US$22 billion); Twitter (US$18 billion); Instagram (US$35 billion); Snapchat (US$15 billion); and Dropbox (US$10 billion). These show that technology will be key to the operation of every company, no less the insurance industry. Gitogo advised that technological disruption, storage of data collected on people, convenience and comfortability are key and Ghanaian insurers must tap into that.
Continuing, he explained that insurers must also build partnerships with big successful companies for the former to stay relevant. Lastly, Tom Gitogo said for 2017 and beyond insurance will be analytics-driven, internet of things (IoT) will dominate as well as personalised pricing.
Aretha Abrafi Duku, the president of the GIA, said insurance premiums’ contribution as a percentage of Ghana’s Gross Domestic Product (GDP) is very low and so rapid digitisation means technology can make or mar insurance. Thus, technology and, mobile technology in particular, presents opportunities that can be used to boost insurance penetration. Poor customer service that leads to late payment of premiums contributes to mistrust by customers so, that needs to be addressed, says Duku, who is also the president of Ghana Union Assurance Limited.
In her statement, Lydia Lariba Bawa, the Commissioner for National Insurance Commission (NIC), said that the capital requirements for the insurance industry ought to be increased to allow firms underwrite big-ticket transactions and also increase insurance penetration.
“…This requires that insurance companies must hold adequate capital as well as appropriate products in place to mitigate the risks inherent in their business activities and the environment. The risk-based capital adequacy framework implemented by the NIC is intended to achieve this objective. Again, to extend coverage of life insurance [to the market], there’s the need for appropriate products that meet the needs of the various segments of the population,” Lydia Bawa said.
She emphasised the call for technology in insurance: “Closely related to this is the need for the appropriate payment systems that will help to extend access to all Ghanaians irrespective of their geographical location or economic status. I hereby urge insurance companies to invest in technology to avail themselves of the opportunities presented by the emerging digitisation of the financial services landscape.”
The commissioner also said extending coverage to the under-served segment of the population will result in poverty reduction, financial stability and social cohesion. Giving an overview of the insurance sector’s performance in the past three years, Bawa said life insurance gross premium grew by 22 per cent from GH¢680 million in 2015 to GH¢828 million in 2016 whereas the non-life premiums grew by 25 per cent from GH¢855 million to more than, billion cedis over the same period.
Continuing, the industry regulator highlights a huge problem that the NIC has noticed.
“Perhaps the most important issue that needs attention is the fair treatment of customers. Treating customers fairly will go a long way to improve customer confidence in insurance. Fair treatment of customers requires Sales Agents to clearly explain the features and all Terms and Conditions (T&Cs) of the product to the customer at the point of sale, not at the point of claim. The T&Cs must be conspicuously displayed in the policy document and clearly brought to the attention of the customer,” Bawa pointed out.
The special guest of honour was Ken Ofori-Atta, the Minister for Finance. His keynote address was delivered by Abena Osei Asare, a Deputy Minister for Finance.
She said Ghana’s insurance penetration of under two (2) percent- which is below Africa’s average of 3.5 percent- is worrying and government was willing to support the industry to make it an important sector of the economy, just as it is in the developed world.
In collaboration with development partners, the government is developing a National Financial Inclusion Strategy aimed at increasing access to formal financial services for the adult population from the current 58 percent to 75 percent by 2023, she said.
“The financial inclusion strategy will serve as a key driver to the development of an ecosystem of financial service providers and the use of technologically driven channels that will serve consumers better,” Osei Asare, who is also the Member of Parliament for Atiwa East, indicated.
“I must commend the National Insurance Commission for the numerous interventions implemented to sanitise the insurance sector. The New Risk Solvency framework requires that insurance and reinsurance companies maintain a minimum capital of GH¢15.00 and GH¢40.00 million cedis respectively,” she further added.
The Deputy Minister said the government will address the low access to credit, low savings and financial literacy through proper regulation of the insurance sector. She disclosed that a new draft Insurance Bill meant to do this, is currently in the stakeholder consultation process.
The Bill “will provide a framework, something that will guide us regarding the dos and don’ts, and the punitive actions, should you break away from the law. So it will give all of us some confidence,” Osei Asare said.
“Investors hesitate because they believe that it’s [the sector] not being backed by proper legal framework. People don’t do insurance because they don’t feel that it is well regulated like banks…It is my desire to see this Bill passed into law soon to deepen the regulations and supervision of the insurance industry,” legislator assured.
Edward Forkuo Kyei, the Chairman of the Life Insurance Council of GIA, in welcoming participants to the conference, called for a joint effort of all stakeholders to boost life insurance penetration. “The agenda to increase insurance penetration in Ghana, behoves on all insurers to acquire the necessary knowledge and share the experiences of others,” Forkuo Kyei advised.
Alhassan Andani, the president of the Ghana Association of Bankers (GAB), who chaired the conference said that there is a direct correlation between life insurance coverage, formalisation of the economy and GDP growth. Andani, who is also the MD of Stanbic Bank Ghana Limited, insisted that we must localise the concept of insurance and insurance education. He said it is ironic that we insure everything else except ourselves, although we keep saying that human beings are the most important assets in our organisations.