Protection against the risks associated with everyday life is essential to everyone’s wellbeing and peace of mind. Insurable risks surround you in all walks of life, in some ways that you may be aware of and others that you may not be, such as:
– Insuring your home and property against the risk of burglary;
– Being able to travel on the bus, safe in the knowledge that if the unexpected happens you will be looked after;
– Preparing for retirement by saving for a pension; Protecting employers and providing assurance for employees.
Insurance is a useful intervention capable of securing people against unforeseen risks. As a social device, it allows the individual to contractually transfer the potential financial consequences of a loss exposure to an insurer. An important benefit of insurance is the reduction of uncertainty and worry. It helps businesses to protect themselves from risk and provides a wide range of services to ordinary people from car and home insurance to pensions, among others.
The insured, in buying insurance, transfers some of the losses he/she cannot avoid and which are too expensive to prevent and too large to be retained to an insurer.
Global trends indicate that knowledge-based societies are developing faster than those who lack the opportunity to access relevant information on issues affecting their lives.
The Insurance Industry contributes immensely to economic growth by converting savings made by individuals into portfolios of assets and smoothing investment returns, as well as allowing individuals to share in the prosperity of the economy. The funds raised by the industry are long-term in nature, especially that of the Life Insurance business, making it the most critical fund for economic development.
Insurance companies also assist economic growth by using the premium income they receive to provide long-term capital for investment, and by providing a large pool of investment funds, cuts the risk and cost of investing, allowing businesses to invest in a wider range of activities.
This indicates that with stable economic conditions in Ghana – low inflation, low interest rates and high income – the industry could fulfil its important role as the favourite savings vehicle in the country’s economic development by providing financial security for businesses and individuals, since people would have more disposable income to start thinking positively about insurance. In view of this, the industry needs to be innovative in engineering products to attract the public’s interest in areas such as Life and Health to increase gross premium incomes.
Based on empirical evidence, the view is that there is a high correlation between the economic growth rates and the savings ratio of developing countries. There is therefore the need for government and the National Insurance Commission (NIC) to be more innovative to ensure the financial viability of the industry while unleashing the Insurance Industry’s tremendous potential through the liberalisation of the investment premium, so that the bulk of the funds are invested in longer-term productive instruments while maintaining the financial soundness of the insurance companies.
Developed countries have seen significant improvements in their economies because the insurance industry, major sources for mobilising funds, has made huge investments that have facilitated the development of such nations. Insurance companies are the basic long-term financial institutions because they have access to a vast potential of long term funds.
If properly managed, these funds could provide a formidable pool of long-term funds for industrial investment.
There is need for a change in perception and attitude of Ghanaians towards insurance. Although insurance is a useful tool for business risk management and social protection, the insurance culture of Ghanaians is still low. The industry needs to create public awareness, not only through advertisement of products but also by providing education on the importance of insurance as well as trying to dispel people’s mistrust of the industry.
For the public to imbibe the culture of insurance and have confidence in the industry, it is imperative that the public know that insurance companies are not there to take advantage of them, but rather that they are established to fill an important gap in the socio-economic development of every nation.
Discrepancies in the payment of insurance claims arise due to the lack of understanding of insurance products by the insured. Bureaucracy is sometimes a problem in the industry because administrative approvals for instance, take longer than they should. This can be curbed through the collaborative effort of the companies and the insuring public to enhance transparency and efficiency. Often times, many of the insuring public failed to painstakingly read and understand the policies bought, hence when their expectations are not met, they lose confidence in the entire business of insurance.
To overcome the challenges facing the sector, there is need to educate the public on the importance of insurance. To be able to do this effectively, the industry needs a core of skilled manpower and continuous training to enhance professionalism, as well as investment in technology and procedures to improve on operational performance.
The NIC must also ensure Insurance Companies endeavour to make their products meaningful and easily understandable to the public by the use of simple language. They must also improve their marketing skills to encourage more people to take up insurance policies, especially in the area of Life Insurance. The public should also try to understand the products of the insurance companies and the policies they buy so that they do not get disappointed when it comes to payment of claims.
In spite of these challenges, there is still a place for insurance in each individual’s financial plan. The insurance industry needs to take advantage of the current stable macroeconomic environment to develop their life business. This can act as a catalyst to attract further investment, employment and provide wealth-creation opportunities for the people of Ghana. It is important for companies to cooperate, develop, build the market and then compete to gain market shares. Insurance companies need to be aggressive and competent communicators so that the need for insurance and its critical role for national development can be delivered throughout the nation.
Public confidence in the industry should be enhanced with the presence of a good regulatory body, the NIC, ensuring that insurance companies transact business to the satisfaction of the public. Effective and efficient regulation of the insurance sector would ensure that there are stronger and financially sound companies to protect businesses, especially the entire financial sector, and the general public from losses.
As the economic and legislative conditions in Ghana improve, it is expected that insurance companies would restructure their operations by injecting additional capital, recruiting qualified staff, developing new products and improving on their service delivery. This would have a positive impact on the Ghanaian economy as a whole and on the insurance industry in particular.
It is therefore anticipated that the industry would re-engineer its capacity to mobilise long-term savings for investment, to provide the much-needed missing link in the efforts towards the future growth and development of the industry in particular and Ghana as a whole.
Credit: Kwaku Appietu-Ankrah