Ghana revamps insurance penetration rate calculation — Set to add pensions, health insurance
In a significant policy shift aimed at providing a more comprehensive view of the country's insurance sector, the Director of the Financial Sector Division at the Ministry of Finance, Sampson Akligoh, has asked the National Insurance Commission (NIC) to develop a new framework that would incorporate pension funds and national health insurance into the national insurance penetration rate calculations.
The current methodology, which only accounts for life and non-life insurance segments, is set to undergo this substantial expansion to reflect a broader spectrum of insurance services.
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In an interview with Graphic Business on the sidelines of an educational conference organised by the West African Insurance Companies Association (WAICA), he said, “We have a standard approach that we have been using to calculate the penetration rate.
“So now, the policy discussion with the regulator is how we can move to capture the other aspects of insurance. Because if you look at pensions, it's insurance.
“If you look back at the law that established SSNIT, it's old age insurance for retired people.
“And if you go to other jurisdictions, they include those figures on their insurance penetration,” he stated.
He said the NIC must, therefore, establish a new framework for those computations that would better reflect the country’s penetration rate compared to the current one per cent which has been stagnant for years.
Mr Akligoh said the Ministry of Finance was committed to supporting this course, noting that the new Insurance Act supports such an initiative.
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“The current Insurance Act is a very sweeping act for the sector and it took a long time for this act to be passed.
So what is left is for the regulator and all stakeholders to develop the framework,” he said.
Stronger regulation
Mr Akligoh also called for stronger regulation of the insurance sector in order to boost market confidence.
He said it was important for the consumers of the insurance products to know that when they put their resources into these products, they have strong regulations that protect them.
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“It will also give them confidence that the companies in the industry are resilient and robust. It's not an easy thing, but it is important that we do all we can to ensure that the regulators are ahead in making sure that the industry remains stable and that consumers are protected,” he said.
He said that was the only way that the long-term viability of the industry and at the same time the impact that the industry would need to have on the consumers is safeguarded.
Work already started
Also speaking in an interview with the Graphic Business, the Acting Commissioner of Insurance, Michael Andoh, said the NIC had already started work on establishing a framework that will allow for pensions and health insurance to be added to the country’s penetration rate.
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“We need to gather data from the pensions sector and the health insurance sector and we are currently doing that,” he said.
Mr Andoh emphasised that pensions and health insurance were an aspect of insurance, therefore calling on the need to consolidate all these areas and measure the proper penetration.
“As it is now, the NIC regulates only life and non-life insurance, so the figures we are calculating are penetration of life and non-life insurance.
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“But to get the proper consolidated view, we need to get data from the health and the pension sector to add, and that is something that we are working on and we hope to get a better view of where the penetration stands,” he stated.
On how soon the new framework will come into force, he said, “We are still talking to the stakeholders involved to get the data that we need to do the calculation. So once we get the data, we hope to be able to publish something, maybe by the end of 2024.
He said when this is done, it would show the true position of the penetration and where the country really stands. “If we get all the data and put it together, it will give us a better view of what the penetration really looks like,” he added.