In recent years the most promising growth in the insurance industry has come from the low- to middle-income brackets via micro-insurance, which targets entities with lower-level earnings. According to a 2015 report from the National Insurance Commission and the German development organisation GIZ, gross micro-insurance premiums grew by 185% between in 2012-14 to GHS13.3m ($5m). Additionally, the study revealed that in 2014 around 7.5m lives or properties were covered by a form of micro-insurance, a sharp increase from 1.8m in 2012. Though some of the growth can be accounted for by the expansion of the middle class, it has also been driven by the development of insurance products sold through telecommunications companies.
Many micro-insurers in Ghana conduct sales via mobile networks as a way to reduce transaction costs, as well as make products both affordable and accessible to lower-income customers. Doing so also allows insurers to more easily collect premiums or settle claims using mobile wallets.
Some 2.7m Ghanaians had signed up to insurance schemes sold using mobile phone credit as of June 2015, making the country a regional leader in mobile insurance. “It’s common for local business leaders to say that there is no market for insurance in Ghana, and maybe that’s partially true for members the upper-income segment who have savings and investments to fall back on in the case of illness or death,” Russell Haresign, country manager of BIMA, told OBG. “However, mobile insurance has proven that if you have the right product at the right price point, and you make it easy to register and claim, there is strong demand from low-income Ghanaians.”
Indeed, very high rates of mobile phone usage in the country offer a solid path into this untapped market. “Currently, the micro-insurance penetration in Ghana stands at about 28%, and we believe that with the SIM penetration in Ghana well over 100%, there is room for micro-insurance to grow,” Tara Squire, mobile director at mobile operator Tigo, told local press in November 2016.
The National Communications Authority (NCA) reported mobile phone penetration of 139% as of February 2017, an increase of nine percentage points from a year earlier. In addition, mobile data subscriptions were up from 39.5% in December 2013 to 69.9% in February 2017. As of September 2017 the NCA reported 37.4m mobile voice subscribers and 22.1m mobile data subscriptions. National telecoms company MTN dominated the market with a 47.58% share of voice, while Vodafone came in second with 24.25%, Tigo held 14.66%, Airtel was at 11.36% and Glo held 2.09% – though Tigo and Airtel later merged, in October 2017, to form AirtelTigo. In terms of data subscriptions, MTN also held the majority, controlling 56.29% of the market, while Vodafone held 16.48%. The rest was taken up by Airtel (12.37%), Tigo (13.7%) and Glo (1.11%). Less than 1% in both data and voice was held by Expresso.
Though insurance penetration in the country has remained below 2% of GDP – comparatively lower than Kenya or Nigeria, which are above 3%, according to the African Insurance Organisation – growth into the informal economy is the clear path to sector growth. In April 2015 Lydia Lariba Bawa, then-commissioner of the NIC, told local media, “Until we find a suitable and innovative means of reaching out to the informal sector, it will be extremely difficult for us to take insurance to the next level of our development.” Insurers recognise this and feel that smaller and cheaper plans will solve this problem. “The way forward for the insurance sector in Ghana is via micro-insurance, because most of the population works in the informal sector,” Solomon Lartey, managing director and CEO of Ghana-based Activa International Insurance, told OBG. “We want to see more formality in the sector.”
The number of people working in the informal sector is significant. According to the Ghana Statistical Service’s National Employment Report, in 2015, 90% of the employed population aged 15 or older worked in the informal sector, with males making up 45.1% and females 51.6%. Additionally, some 62% of businesses in the country were unregistered.
The mobile insurance segment began in 2010 with the partnership between Tigo and BIMA, an insurance provider that specialises in using mobile technology to expand into emerging markets. Initially marketing family care products but rapidly branching into life, hospital and income-protection segments, Tigo had 1.6m registered mobile insurance customers as of mid-2017. The product is the third most popular service offered by the company, behind voice and SMS, but ahead of data and mobile money. The next largest provider is Airtel, whose partnership with MicroEnsure, a UK-based insurer, began in 2013 and has since expanded to over 300,000 clients. More recently, in May 2017 MTN signed an agreement with aYo, underwritten by Metropolitan Life, to provide payment insurance for mobile money banking.
Mobile insurance taps a mid- to low-income market historically ignored to a large degree by the insurance industry. A 2015 survey by Tigo found that 60% of its mobile insurance clients earned less than GHS600 ($226) a month and 90% earned under GHS1000 ($376) a month; for 95% of customers it was their first private insurance policy. By comparison, GDP per capita at current prices stood at GHS5091 ($1914) in 2015, GHS6068 ($2281) in 2016, and GHS7157 ($2690) in 2017, according to the IMF.
Each policy is an opt-in. New customers typically speak to a call centre agent, or an agent in a rural village, who explains the policy and completes the registration. Customers then receive a text message and provide an electronic signature via reply.
Life and hospital are the two dominant market segments for mobile insurance. Tigo has been charging a flat fee of GHS1.50 ($0.56) a month for its Family Care insurance, which provides life coverage for the subscriber and a family member. The payout varies from GHS200 ($75.17) to GHS2000 ($752) a month, depending on airtime usage. Tigo Hospital insurance, also paid for with a GHS1.50 ($0.56) premium, entitles the covered party to a GHS30 ($11.28) per diem in case of hospitalisation. Tigo also offers accidental disability coverage for GHS7 ($2.63) per month. “Our studies show that the hospital policy normally covers around 30% of costs,” said Haresign. “Given the price point, the product can’t cover all potential fees, but for people on limited income, the per diem can be a huge help.”
Airtel has charged a premium of GHS2 ($0.75) per month – or GH4 ($1.50) for the coverage of an additional family member – but offers the client life, accidental disability and hospital provisions, which vary depending on the previous month’s total mobile recharge value. Recharges up to GHS4.99 ($1.88) earn GHS500 ($188) for both life and accidental disability, and a hospital cover of GHS50 ($18.71). At the top end of offerings, recharges of over GHS50 ($18.79) provide GHS7500 ($2820) for life and accidental disability, and hospital coverage of GHS500 ($187). In July 2017 Airtel introduced the country’s first mobile maternity insurance, with payouts of between GH100 ($37.58) and GH1000 ($376).
The MTN aYo mobile policy provides coverage for clients via its mobile money transfers service for the cost of 5% of the transferred amount for 120 days after purchase. In the event of death, accident or trauma, resulting in at least a one-night hospital stay, the beneficiary, or receiver of the transfer, is eligible for triple the amount sent to them over the last four months, which is paid out over a 12-month period. The plan is also available for clients transferring funds to pay school fees.
For mobile phone operators, the introduction of micro-insurance has been a powerful tool in generating customer loyalty. “Mobile insurance is a sticky product, which is great for telecoms companies because we want customers to stick around,” Amir Abdelazim, chief technology information officer of Tigo, told OBG.
“It is common for individuals to have multiple SIM cards that they use to take advantage of each operator’s promotions. By linking life claims to a user’s spending history, we can encourage them to keep using our network. On trips outside of Accra, seven out of every 10 conversations I have are about micro-insurance. It is really successful and there’s a buzz about it,” Abdelazim added.
The sector has benefitted from light-touch regulation. In 2015 the Bank of Ghana ruled that companies should not use airtime for payment of financial services such as insurance, but following a discussion with operators it reversed the decision.
“The Bank of Ghana considered the issue of life insurance linked to airtime to be an issue, but they were open to talks with the mobile insurance companies, and now realise it’s a good thing,” said Haresign.
“Ghana’s regulation is promoting the development of the sector, and the country has become a leader in this area, held up as a successful test case.
The NIC has been progressive since the early days, when mobile insurance wasn’t well defined. It has been open to innovation, and the introduction of mobile insurance conduct guidelines in 2017 have provided greater transparency for players and improved client protection.”
As new entrants have penetrated the market, the rate of claims has gone up. By June 2017 Tigo had paid over 18,000 claims, with around 800 a month processed by the firm, according to Haresign. “More players in the market creates awareness, boosts understanding of mobile finance, and popularises the concept and functionality of it,” he told OBG. “It’s normal for insurance companies to focus more on distribution than on claims, but we are delighted to be at that second stage now.”
The relatively small scale of mobile insurance policies and payouts means that it is often not economical for every claim to be validated in detail. For health and hospital protection, for example, most Ghanaian mobile insurers accept just one proof of death or hospitalisation certificate.
However, along with low requirements comes the risk of fraud. “In a country where 20-30% of Ghanaians don’t have an identification document, The introduction of micro-insurance has been a powerful tool in generating customer loyalty it’s important to apply discretion to claims,” added Haresign. “We need evidence, but we don’t make it onerous to the policyholder; we accept some fraud may occur, but we try to keep it low.”
The segment’s main objective going forward is reaching and educating new customers. “The lack of familiarity with insurance products among the population is hampering growth. Education is key, but this cannot be done by insurers and underwriters alone. It will take a concerted effort from all industry players including insurers, reinsurers, intermediaries and the regulator,” Joseph Kusi-Tieku, CEO of GN Reinsurance, told OBG.
According to Haresign, given a literacy rate of around 60-70%, and the fact that many citizens speak a local language with limited English, it is important that explanations be verbal. “The failure of a large number of microfinance companies has generated a mistrust of financial services in rural areas; this increases the need for constant re-education and a clear claims policy,” he added.
The success in this area of insurance has made it one of the most dynamic segments in the industry, with all entrants looking to develop new policies, and make their premiums and claims payment systems more efficient. In addition to products such as Airtel’s maternity cover, companies are looking into other offers such as coverage of educational fees in the event of the parent’s death, as well as partnerships with hospital chains in order to improve access and efficiency of treatment.
Increased adoption of mobile money, first introduced in Ghana in 2009, could catalyse micro-insurance growth further. According to figures from the World Bank, in 2015 the number of adults in the country with mobile money accounts doubled to reach 17% by the end of the year, suggesting there is scope for further expansion.
“In Ghana we have seen some resistance to mobile money from the banking sector, and customers still need education,” Abdelazim told OBG. “However, in the case of East Africa, we have seen how mobile money can replace cash given the right incentives. If Ghana could move towards a greater adaptation of mobile money, the mobile insurance segment would be one of many to benefit.”
Mobile applications can be disruptive to traditional business models, but in the case of insurance, growth might have positive consequences for incumbent underwriters. “I don’t think we pose a threat to the existing industry because we are not operating in the same space,” Haresign added. “For government or private sector workers earning GHS4000 ($1500) a month, a GHS100 ($37.59) claim is not worth making. Instead, I think mobile insurance should be seen as a catalyst for long-term growth of the industry.” Ghana’s leading position in mobile insurance could therefore prove highly influential in the creation of a new generation of customers and stoke wider industry growth.
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