By the Book

The no premium, no cover policy has been an important part of the NIC’s agenda. From your perspective as the regulator, what do you think the impact of this directive has been on the market so far?

It has had a big impact on the liquidity of the insurance companies. Before this directive came, insurance companies were only able to collect 35% of their premiums. It was as if they were virtually begging the policyholder to pay. Then, when there was no claim in the year, the policyholder did not feel the need to pay the outstanding premium, even though the insurance company had provided them with cover. With this new directive, in 2014, the NIC asked insurance companies to stop selling on credit and gave them up to the end of 2014 to collect all outstanding premiums. Insurance companies were required to write off all outstanding premiums as of December 31, 2014, from their balance sheet. We were not going to accept them as receivables, as we did previously. Since then the market has been happy. The only hitch is that now that we are getting the premiums upfront; claims have to be dealt with adequately and promptly. That is the next phase. We have issued the guidelines, but we have not started enforcement. The insurance industry tells me this policy is the best thing that has happened to the market in a long time. Initially, they were apprehensive about the risk of losing clients. When we first started with this program of reform, I imagined our greatest challenge was going to be the public. We thought they would not pay up, but the public presented no problem.

What do you consider to be the key dynamics that make Ghana a potentially attractive market for investment in insurance?

Ghana has been categorized as a lower-middle income economy. We have a growing middle-income group, and now we have a large group of unemployed young people, which is not ideal. However, we hope that in the not too distant future, all these people will find jobs. There is potential for this to drive the insurance market. The whole month of October was dedicated as Insurance Awareness Month. Therefore, we did a lot of education together with the Ghana Insurers Association (GIA) to boost awareness. We involved the Ministry of Finance and we did programs on television, advertising, and promoting the benefits of insurance. The NIC has a complaints bureau and if you have a problem with an insurance company you can come and report it to us and we can mediate.

Are you seeing a result in terms of insurance penetration rates?

We have not done a survey yet; however, we believe there will be some change even if it is not drastic. Things are improving because previously we found that the boards of directors were not always directly involved in directing their companies and not exercising their over-sight responsibilities over the companies. NIC did a training course for them and we told them we are now going to hold boards of directors responsible, therefore management teams have to do the right thing. We are also strengthening our position by getting to know our market. The market is responsive. People have been telling us that they did not even know that there was an insurance commission. Now consumers and the industry are getting to know about us, and we are becoming visible. We have just had our very first industry meeting where we invited CEOs and chairmen to discuss our problems. Now the commission has a strong relationship with the industry. They realize that we need to work together. On top of that, reforms such as no premium-no-cover, corporate governance, risk-based supervision, and risk-based solvency are all about improving efficiency and strengthening the balance sheet of the industry. For example, a few years ago, the largest asset you could see on the balance sheet was premium debts. That has changed. Now you see the investment-asset ratio of companies rising to 74%.

In terms of the competitive landscape, how would you assess the number of companies and is there room for consolidation? Do you see the market changing?

We feel we have too many companies for the size of our population and market. Currently there are 48 companies. Of these, 26 are non-life insurance companies and 22 life insurance companies. We also have three reinsurance companies and 76 broking firms. Within that number some are bigger and some smaller. Therefore, there is room for some of those entities to merge and become larger. Nonetheless, we still receive applications from entities that want to come into the market. Our legislation does not give us the mandate to cut the number of companies, but we are considering this. The minimum requirement has been increased to around $5 million (GHS15 million) for insurance companies and for reinsurance companies $12.5 million (GHS40 million).