Ghana's financial institutions improve insurance penetration

Bancassurance is a booming business in Ghana. The insurers and banks are actively teaming up in partnerships to offer a wide range of competitive and innovative products. Meanwhile, the regulator has been supporting this distribution method and remains positive that it could help the country to improve penetration and density. Some questions have been raised about these arrangements, however, and there are concerns that the relationships can lead to potential problems, but bancassurance is likely to continue to grow as the private sector supports it and the regulator tackles potential weaknesses in the structure.

The segment has been active in Ghana for a number of years. Standard Chartered Bank Ghana was among the first to offer bancassurance in 2007, when it teamed up with Enterprise Life Assurance to sell a number of products. One was the Family Funeral Support Plan, which is still available today. Under the terms of the policy, a lump sum is paid out immediately to the close relatives of the deceased to cover necessary arrangements – a niche segment that is of particular promise in Ghana, where funeral services are often large and expensive events. Payouts on the policies range from GHS1000 ($278) to GHS2000 ($555), and monthly premiums range from GHS7.20 ($1.99) for a family and a GHS1000 ($278) payout to GHS35.60 ($9.88) for a family plus four grandparents and a payout of GHS2000 ($555). The application is simple and straightforward and anyone between the ages of 18 and 54 may apply, while family members can be as old as 74 years.

Regulation

Funeral policies offer particular potential to insurers looking to expand penetration into retail markets, particularly in lower-income segments of the population, which makes them a natural fit for bancassurance. Banks are particularly competitive in this space not only because they have the distribution, but also because they are able to finance premiums over time. Customers have said they buy insurance through banks because of the convenience, but also because they trust their banks, which provide them with more updates, according an April 2015 presentation by Henry Manyo-Plange, head of bancassurance at Stanbic.

Stephen Kyerematen, managing director of Activa International Insurance, told OBG, “Focusing on the retail side is a useful way for companies to reduce their dependence on the big corporate customers.”

The National Insurance Commission (NIC) issued guidelines in 2010 on bancassurance. The requirements are comprehensive and provide a good deal of protection for the parties involved, including the bank, insurer and insured. The guidelines state that all insurance sold must be offered by insurance companies licensed under the Insurance Act of 2006. Life and non-life products may be offered only to individuals. Existing products that are adjusted for the bancassurance market must be approved by the NIC. A copy of the agreement between the bank and the insurer must be lodged with the NIC, including proposed branding. The bank must have one designated person, who must be licensed as a sub-agent, and banks cannot compel customers to buy insurance products. Banks must also submit annual reports to the NIC detailing the number of policies sold and premiums earned from the sales. Banks are also prohibited from selling policies that they themselves have originated, among other things.

Times A-Changing

At the same time, the rise of bancassurance is affecting traditional channels. Banking institutions are doing so well selling insurance that traditional brokers are starting to feel the pressure. According to the NIC, bancassurance has made the sector so competitive that it has become difficult for some intermediaries to survive. However, the commission has devised a solution. According to local press reports, the regulator has said that it will be publishing an Insurance Intermediaries Code to strengthen brokerages and help them compete with banks. Speaking at Enterprise Life’s Top 50 Brokers Sales Representative Conference in Accra in June 2015, Simon Nero-Davor, deputy commissioner of insurance, said, “With the kind of competition that we are witnessing, insurance sales representatives – brokers – will have to exhibit the highest level of professionalism in their operations in order to stand out and succeed. Brokers will have to distinguish themselves by capitalising on their expertise and competence as insurance professionals to provide seamless services to clients.”

New Deals

Banks and insurance companies continue to come to cooperation arrangements, with some substantial agreements between major players. In May 2015, for example, Ecobank partnered with South Africa’s Old Mutual to sell insurance through its branches. Ecobank has 78 outlets throughout the country and serves 800,000 customers a day. The deal forms part of the bank’s strategy to become a one-stop shop for financial services. Old Mutual has been in the country since 2013, when it acquired Provident Life Assurance, which was renamed Old Mutual Life Assurance Company Ghana. As of early 2015, the provider has introduced four products, all of which will be available through Ecobank’s network, namely funeral, travel, education and credit life policies. Its credit life policy will also be good for all loans extended by Ecobank.

In early 2015 Société Générale and Prudential Life Assurance signed a bancassurance agreement. As a result of the partnership, Société Générale employees will be trained to sell and market life insurance products, while Prudential products will be distributed via 39 Société Générale branches in the country. It is Prudential’s first bank partnership in Africa and part of Société Générale’s wider efforts to expand its range of offerings for its customers.

Société Générale has also signed an agreement with Allianz Insurance Company. In early 2015 the bank announced that it would be offering two products in cooperation with the French insurer. Sound Cash will protect bankcards and chequebooks of policyholders against loss from fraud. Customers may be reimbursed up to GHS1000 ($278) under the programme. The second product, Sound Drive, offers a wide range of protection for the owners of motor vehicles, with two options available. The first offers comprehensive coverage and the other is limited to third-party liability.

More Products

In line with the increased number of providers, existing operators are also diversifying their product lines. Since bancassurance started in 2007, a wide range of products have been offered, many of them innovative and many supplying competitive cover. Standard Chartered, for example, now has a suite of products available. Its TravelSafe line covers the insured against injury and baggage loss while overseas, and pays the cost of repatriation if necessary. The hospitalisation limit is €30,000, while the limit for personal accident is GHS3500 ($971) and baggage loss is €250.

Stanbic is also in the Ghanaian market, with a wide range of offerings such as a FuneralPlan, which pays up to GHS6000 ($1665) and provides coverage to people up to 64 years of age. The company also offers homeowners insurance, which protects property against fire, lightning, explosion, earthquakes, riots and civil commotion, as well as a motor policy, which offers for liability or comprehensive coverage, and gives customers the choice of paying premiums monthly or annually. Barclays Bank of Ghana also has a substantial range of policies on offer. These include: an education plan, which pays out in instalments over a five-year period; a funeral plan, which pays as much as GHS5000 ($1387); a motor plan, with options for third-party or comprehensive coverage; a hospital plan, which pays from day three of hospitalisation to day 180; and a travel plan.

Inclusion

Bancassurance has the potential to help Ghana meet its goals of higher penetration and insurance density. Bank branches are far more abundant than insurance broker offices, while banks themselves have the benefit of already being credible institutions, which can help clients get more comfortable with the idea of buying insurance. Bancassurance may not support inclusiveness directly, as the country is underbanked and the poor have little contact with formal financial institutions, but it may increase the uptake of insurance in the country.

For banks, bancassurance remains a potentially attractive proposition as it allows them to leverage their existing infrastructure for an additional income stream. By creating a non-interest income, it helps banks hedge their exposure to the markets and retain customers, according to Manyo-Plange. Given their potential benefits, banks are likely to continue pushing for these arrangements and bancassurance in Ghana should continue to see growth.