What stifles growth of bancassurance in Ghana?

In November 2007, when a private local insurance company partnered a bank to launch Ghana's first bancassurance products, the issue about replicating Europe's success stories of insurance riding on the back of banking was on the minds of local stakeholders at the time.

With insurance penetration staggering at less than one per cent at the time, many were confident that selling insurance in banking halls, a practice which has become known as bancassurance, would help erase the myths and negative perceptions that militated against the growth of insurance and encourage more Ghanaians to patronise a service that provides financial buffers against future risks.

In the bigger picture, the expectation was that a strong growth in bancassurance would help mobilise capital for economic development, deepen the financial services sector, broaden financial inclusion and help ease the burden individuals and businesses go through in the wake of crisis.

Sadly, however, this has not been the case almost a decade after the introduction of that model in the country.

Although the National Insurance Commission (NIC) and the Bank of Ghana (BoG) have introduced regulations that allow insurers and bankers to partner for the purposes of bancassurance, it has not blossomed to expectation.

Until 2012, publicity on the service was low as most banks saw bancassurance as a secondary service deserving less attention.

Insurance penetration still low

The same applies to the transformation and growth that bancassurance was envisaged to bring to insurance penetration in the country.

Between 2007 and 2015, insurance penetration had virtually grown beyond one per cent; but the number of insurance patrons still lagged behind two per cent.

The situation has ignited discussions among stakeholders, with many pointing accusing fingers at the low margins banks get in return for selling insurance products.

"The margins are low and that is discouraging. Unless you are committed and future-minded, it will be discouraging to even start," a seasoned banker said.

Fixated on the prospects

However true this may be, an industry expert and Head of Banassurance at uniBank Ghana Limited, Mr Alfred Ludwig Kissiedu, said the discussion must be broadened beyond profits.

Instead of zeroing in on how low margins have discouraged banks from promoting bancassurance products, he said stakeholders must weigh the commitment of top management of the various banks to that partnership and its implication for success.

"If your board knows the importance of bancassurance, if the top executives buy into it and management accepts it, then everybody in the bank will be made an ambassador and the message will be carried across properly," he said in an interview.

"At uniBank, our board and top executives know the importance of bancassurance and they have bought into it. Because of that there is trust of success and we are seeing it," he said.

The uniBank experience

uniBank, which started operations in 1997, partnered sister company, StarLife Assurance four years ago to launch bancassurance products, a service Mr Kissiedu said, was doing very well.

The bank started with three products – the Wealth Master Plus, Home Call and Family Protection Plan –  all aimed at providing financial buffers for future investments and risks against injury, death and/or accidents.

Although interest in the products was low at the outset, it has picked up in recent times with the customer base inching closer to 11,000 as of December, last year.

"These successes are as a result of the understanding, commitment and premium placed on bancassurance as a business line from top management," uniBank’ s Head of Bancassurance said.

The presence of Mr Kissiedu at uniBank is also of importance to the bank's bancassurance drive, given his expertise and experience in the industry.

After spending close to a decade at Ecobank Ghana Limited, Mr Kissiedu pioneered bancassurance in that bank, which was launched in May, last year.

Before joining uniBank, he initiated and partnered a team of like-minds to organise Ghana's maiden bancassurance conference, which brought together stakeholders to discuss the business angle of the service.

Generally, Mr Kissiedu sees himself as an ambassador of a service still at its infancy, a passion he now strives to translate into visible results at uniBank Ghana.

Business case for Bancassurance

Currently, NIC regulations do not allow banks to sell general insurance products to corporate entities, a limitation the banks have long cited as a disincentive to their full involvement in the business.

The explanation is always that because majority of the insurance business is in the hands of corporates, limiting banks from selling to them would mean that they are forced to participate in an already saturated and small market.

While siding with that stance, uniBank's head of bancassurance said that argument only held where stakeholders refused to take into account the long-term benefits of the service.

A Consultant and the Executive Director of the Otumfuo Osei Tutu II Centre for Executive Education and Research (OTCEER) in Kumasi, Nana Otuo Acheampong, shared similar views.

In spite of the frequent exposure of banking staff to customers on a daily basis, Nana Acheampong said evidence showed that most banking staff were not informed of the need to continuously remind their clients of the availability of bancassurance products, which resulted in less than expected patronage for such services.

"I am saying that if a bank brings a product and does not talk about it to customers, how does it expect them to patronise it."

 "Management may be informed of the need to introduce bancassurance but they also need to get the staff, especially tellers and customer service personnel, to understand that they need to discuss the product with customers on one-on-one basis," he said.

New products

Currently, uniBank's strategic objective is to have bancassurance contribute 10 per cent to its profits in the next few years.

Mr Kissiedu admits that attaining that target was daunting, but explained that it would be realised on the back of four new innovations to be introduced today.

After years of carefully studying the needs of the market and the services of competitors, Mr Kissiedu said the bank, together with its partner, Star Assurance, had developed a motor, travel, personal accident and homeowners insurance policies, which would sell to customers from the Accra Main, World Trade Centre, Kaneshie, Accra Mall Branch and Darkuman branches of the uniBank.

Each of the four products is tailored to solve a specific challenge in everyday life activities in line with the bank's aim of becoming a one-stop shop for financial services.

“But signing on to bancassurance is only the first step. The service differentiation is key”.

"We have a major role to play in changing the negative perception that insurance has in our part of the world, which is also a major factor inhibiting the growth of insurance penetration in Ghana. Banks or bankers, perhaps, understand better the role of client relationship management. It is for this reason that at uniBank, deepening the relationship between us and our customers who buy any of our bancassurance products, is an imperative," Mr Kissiedu explained.

Way forward

Going forward, banks need to understand that they have a key role to play in ensuring that insurance penetration is raised to appreciable rates.

If that understanding is there, majority of them will commit valuable resources and time into getting their customers to buy their services, which will, in the long run, strengthen their balance sheets.

The NIC will also have to further toughen its stance on claims payments, one of the things giving the industry a bad name.

Although recent regulations from the commission reduced the time spent in making such payments, nothing should stop the regulator from moving further to 'name and shame,' insurers that fail to meet stipulated time frames in paying genuine claims.

If that happens, the industry will wake up to the need to be responsive in claims payments similar to the way it expects the public to respond to appeals for paying commensurate premiums.