Interview: Justice Yaw Ofori
How can the overall contribution of insurance to Ghana’s GDP be increased?
JUSTICE YAW OFORI: Insurance has enormous growth potential. As a regulator, the NIC is heavily involved in researching, designing and implementing best practice in order to generate more trust in the sector and establishing clear rules. Achieving the goal of increased penetration and bringing it into double digits is also fundamental. Our key focus areas in order to achieve this will be promoting micro-insurance, and creating opportunities for access to other sector-related products for farmers by leveraging on technology and collaborating with government agencies, such as the Ministry of Food and Agriculture. Growth is also fuelled by innovation, which can also be promoted and protected through new products or distributions channels.
Another important aspect is to promote the development of human resources, especially those related to claims processes, since on many occasions a lack of understanding of the guidelines generates inefficiencies and difficulties with processing times, which contributes to mistrust in the sector. To this end, besides upcoming claims processing audits, the NIC is committed to the improvement of the Ghana Insurance College, for which additional funding alternatives are already being considered. The ideal knowledge areas to be focused on are claims processing and underwriting, and motor, life, property and fire insurance. More specialised or niche areas, such as takaful (Islamic insurance), are also demonstrating promise in terms of greater market share. In addition, if the government insures a portion of their assets in the future, this would set a positive tone for the sector while increasing the contribution of insurance to the economy.
What would be the effect of increased capital requirements in the sector?
OFORI: Overall, some degree of increase in capital can be positive to the industry given the current competitive landscape. However, this is still an ongoing discussion, and there are both benefits and associated risks if this increase does eventually go ahead. The main benefit will be to have financially stronger players that can take on larger risks in key areas of the economy. Insurance is a global business, and Ghanaian companies should be able to compete in such a context. Attracting investment is critical for the economy, and the presence of stronger, internationally oriented and trusted local insurers can contribute to achieving this goal.
The possible downside is that if a consolidation procedure occurs, which is very likely, this could somewhat slow down our pursuit of higher insurance penetration among certain sectors of the population, since micro-insurance requires a substantial degree of customisation. In any case, an increased capital requirement is necessary and should be tied to a major currency.
How much room for regulatory coordination exists between the banking and insurance industries?
OFORI: Bancassurance has come a long way in Ghana. Even though it faces some typical resistance in the sector, looking at the bigger picture, it represents an easy way of accessing the market and is a distribution channel that makes selling insurance easier. Product bundling is a good idea, and looks to be the approach of the future since it can also contribute to achieving the objective of increased penetration.
A number of potential challenges are to be found within the regulatory sphere, since banks are monitored by the Bank of Ghana, while insurance products are overseen by the NIC. However, there are continuous lines of communication for regulators, with a committee currently in place, which can be strengthened and reinforced to address any issues that we may come across as they arise. Receiving and sharing information from both directions, from regulators and industry players, is another critical area that we must continue to turn our attention to as the sector moves forward.
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