Interview: Aaron Issa Anafure
What are the biggest challenges facing the sector?
AARON ISSA ANAFURE: The main obstacle to sustained growth is a lack of awareness of the benefits and long-term value of insurance products. For many players this has translated into difficulties related to liquidity, the pace of development of new products and business generation. Much more could be done to by using the existing institutional framework as part of a comprehensive communication campaign.
A positive example of progress is the introduction of the “no premium, no cover” policy, as many companies in the past were selling on credit, which created unnecessary liquidity risks for the insurance and reinsurance sectors. A good way of improving awareness, while also protecting the well-being of Ghanaians, is to make insuring employees a standard part of business practices in the private sector, and to its issuance. These measures, coupled with an improved business environment and a growing middle class, are set to boost the expansion of both life and non-life insurance.
How do you assess competitiveness within the market, and is there scope for consolidation ?
ANAFURE: The ease with which a new company can be registered in Ghana, as well as the low entry barriers in the insurance sector, has created an unusually competitive landscape that is overpopulated. In the long run, having close to 50 insurance companies serving a population that yet to reach 30m is unsustainable.
The recent focus on strengthening the sector is likely to lead to additional regulations that will encourage having fewer institutions with stronger balance sheets, similar to what is taking place in the banking sector. This is critical for the life segment, as the long-term financial sustainability of insurers has a direct impact on the quality of life for the insured population. A concentrated market is beneficial, as having more customers means that companies are able to better manage risk and respond to claims, in turn becoming more trusted.
Which sectors of the economy will drive insurance activity over the medium term?
ANAFURE: The industrial sector is quite promising as a driver of the economy, as is the recent One District, One Factory initiative. This relates to the insurance sector, as demand is expected to expand due to the insuring of capital goods and real estate stemming from new projects and industrial parks. More importantly, these projects will also create additional employment opportunities, which are likely to generate higher demand from individuals and businesses. Overall, a well-informed population that has a stable or rising income is more able to grow the sector.
Another area with potential is pension schemes, as these would bring more dynamism, especially since both national and private pension funds have a role to play. Ghana has a demographic that requires forward planning, especially with regards to pension funds and long-term insurance. This will be particularly important, as the country already handles a high dependency ratio in the overall economy, so proper long-term plans will be needed to prevent it from becoming an issue.
How effective have bancassurance and mobile insurance been as distribution channels?
ANAFURE: Bancassurance has not fulfilled its potential yet. Embedding products is the only way to move forward, and new products need to be created, marketed and sold together in collaboration with banks. Unfortunately, insurance is still perceived as an extra expenditure; however, even if this does not change, by fully enabling product bundling, insurance could be perceived as an added bonus to banking products.
As far as mobile insurance is concerned, the potential for growth is tremendous, since insurance penetration is far below mobile penetration. In rural areas, mobile phones are more widespread than either banks or insurance offices. Thus, the acquisition costs of new customers could be optimised through mobile insurance.
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