Great strides have been made in Ghana in recent years in terms of promoting microinsurance by developing a framework for the segment and introducing new delivery mechanisms. Insurers have eagerly begun to offer new products that will help rural and low-income customers access cover. The country has set a strong foundation for increasing inclusiveness and getting penetration above the current rate of about 2%. More regulation is needed in order to ensure consumers have adequate protection and further promotion would be helpful.
The National Insurance Commission (NIC) established the Microinsurance Market Conduct rules in 2013. Under the guidelines, an insurance company is not allowed to market a microinsurance product or renew a microinsurance product until it has been licensed by the NIC. Insurers may designate contracts as microinsurance if they meet a number of criteria. They must be designed for one of three groups of people on low incomes; specific low-income populations; or low-income people in a particular region. Furthermore, the premiums must be affordable for those targeted. The commission is also calling for straightforward language, not technical jargon, which can be understood by anyone. Few exclusions are permitted. The contract must state clearly that it is a microinsurance policy and it must bear an NIC-approved microinsurance logo on the first page.
Case By Case
A written record must be kept of an insurer’s assessment of the contract’s appropriateness for the group at which it is aimed, and this assessment must be kept for three years after an insurer stops offering the product. In order to be approved the insurer must lodge an application with the NIC. The commission has also decided against specific quantitative measures to define microinsurance products, and, unlike other countries, it has not published specific thresholds for microinsurance.
In its guidance notes the NIC said that it chose to avoid such definitions because it wanted to give insurers the flexibility to be innovative and creative with product design. However, this freedom has come with its own burdens. The flexibility presents an additional responsibility to carry out a meaningful assessment to ensure the product meets the needs of its target customers. Therefore, the commission expects insurers to demonstrate that they have carried out a meaningful assessment according to NIC guidelines.
There is no application form per se. Insurers must submit the actual contract, including a summary of benefits and a written assessment of the contract drawn up by the insurer. If the application is approved, considerable flexibility is allowed in terms of sales. Specifically, people who are not in the targeted categories may be permitted to buy the insurance, meaning that someone who is not a low-income earner can buy a policy designed for low-income Ghanaians. The NIC will permit the insurer to engage in community rating, evaluating the risk of a group rather than of individuals.
A policy summary is also required under the current regulations, and the NIC details what should be included in it. It should name the policy and insurer, describe the risks covered and benefit provided, and detail the duration of the contract and the responsibilities of the insured under the contract. The summary should also explain that policyholders have the right to lodge a complaint, as well as explain how this can be done. A broker is required to explain the premium schedule and the consequences of not paying a premium. In cases where the premium is bundled with other products, the premium must be broken out and the policyholder must be told whether the insurance is compulsory. The rules are particularly detailed when it comes to the payment of claims, and the time-frames required are especially short. An insurer must accept or reject a claim within seven days and must pay, if the claim is accepted, within 10 days. Written notice of a rejection is also required within 10 days.
Efforts have also been made to increase awareness about microinsurance in Ghana. Mass media campaigns have been conducted with the help of donors to explain microinsurance and why it is needed. Research has been conducted and capacity building has been undertaken. Support in this vein has been provided by a number of Western governments and global trade organisations, such as the International Association of Insurance Supervisors, which runs the Access to Insurance Initiative. Certainly supply is increasing, with an equal improvement seen in coverage. According to a report from the Consultative Group to Assist the Poor, the number of companies offering microinsurance rose from 11 in 2011 to 15 in 2014. The number of products also increased from 16 to 29, and the number of policies jumped from 1.7m to 4m.
A number of offerings in the segment are innovative and attractive products. For example, GLICO Life’s Anidaso policy provides basic life coverage, with an optional hospitalisation income benefit and an optional accident disability benefit. It can be purchased for as little as GHS10 ($2.80) a day. The Edwa Nkosuo policy is a low-premium savings policy with life insurance protection added. It is a one-year renewable contract in which premiums of as little as GHS2 ($0.55) a day are collected on a daily basis through an established network of agents. Individuals are not underwritten, but rather the policy is sold to the community and the risk is shared.
Star Microinsurance offers a My Child Care Plan, which pays a benefit for education should a parent die and includes hospitalisation. The firm also sells an investment and funeral policy, which adds an investment option to a classic funeral policy, and the Abusua Nkyemfa policy covers life and hospitalisation and is distributed through Ghana Post. Star Microinsurance also offers a wide range of credit protection policies: the Rural and Community Bank Loan Protection Scheme and the Money Lenders Association of Ghana Loan Protection Scheme, among others.