Does the depth of insurance penetration matter?

There is no denying the fact that Ghana’s insurance penetration remains abysmally low, currently below 2 percent, despite the uptake of insurances being perked at about 30%.

This unfortunate phenomenon appears to give credence to the view of some industry watchers who believe the insurance industry in Ghana is progressing in a retrogressive gear! No and yes, such perceptions or rather misconceptions have some seed of logic in them.

Hardly would a typical media person engage any member of the insurance fraternity without raising the issue of ‘penetration is low’ and expect the latter to accept it hook line and sinker! No Sir, No Madam! Indeed, the insurance penetration rate is a function/measure of the insurance industry’s total contribution to the Gross Domestic Product (GDP) of the country.

It is trite that the under 2% contribution may appear small, and thus, make it easy to conjecture the fact that, yes, insurance is not doing well in Ghana.

However, compared to some other insurance jurisdictions on the continent, Ghana’s measure of the penetration rate is constrained by the exclusion of health insurance and pensions assets.

What do we mean? In South Africa for instance, where the penetration rate is a combination of life insurance, non-life insurance, pensions, and health insurance, thus giving them a relatively higher rate of 7%, Ghana’s is limited to only the life and non-life insurance premium contribution.
Does low penetration suggest a dwindling sector?

The 2020 Financial Stability Review Report recently revealed Ghana’s insurance industry witnessed an increase in its total capital base from GH¢2.53 billion recorded in December 2019 to GH¢2.91 billion as of December 31, 2020.

According to the Report, the increase amounts to a growth of 15 percent in 2020 over the previous year.

The Report attributed these positive developments to good corporate governance practices championed by the regulator and stringent measures taken by insurance entities to meet the new minimum capital requirement for the strong results. (Source: 2020 Financial Stability Review Report).

It is important to note that the Financial Stability Review assesses developments in the financial system and the broader macro-economy, with a focus on emerging threats to financial stability. The report specifically covers macro-financial developments, and the four broad sectors of the financial system; i.e. banking, insurance, pensions and securities sectors.

The publication of this report is targeted at promoting market transparency and public awareness on financial stability issues in Ghana. The report was compiled by the Bank of Ghana (BoG) in consultation with the National Insurance Commission (NIC), National Pensions Regulatory Authority (NPRA) and the Securities and Exchange Commission (SEC).

Whereas many sectors of the economy reeled under the threat and actual impact of the COVID-19 pandemic, the same cannot directly be said about the insurance industry, as the sector was heavily activated through innovations by players in the insurance space to ensure business continuity and alternative ways of doing business.

At the heart of this, as the Report cites, good Corporate Governance practices spurred the growth. While the insurance industry is growing per coverage, this is however, being blindfolded by the ‘lighthouse’ of the focus being only on penetration rate! It is akin to a situation where we seem to suggest that the importance of a car engine supersedes that of a car tyre forgetting the fact that both must work hand-in-hand to propel movement!

What other factors account for a struggling penetration rate?

The National Insurance Commission (NIC) has taken steps to sanitize the insurance space, as it has initiated proactive steps to deepen its regulatory regime, in a bid to avoid a possible spillover effect from what happened in the banking sector.

Implications of the desire to increase penetration rate

Borrowing from a popular financial language, ‘1% of GHC1million is bigger than 10% of GHC100,000’, suffice it to say, while the desire to have an exponentially high insurance penetration rate remains in focus, even at the current rate, the continuous expansion of the Ghanaian economy will effectively enable growth of the insurance industry.

Instructively, the insurance regulator, the NIC, for some time now, has shifted focus towards a risk-based supervision, aimed at enhancing the sustainability and responsiveness of the industry players. Merely redefining a supervisory regime would appear inadequate, as the capacity of players to underwrite large transactions have often been called to question, but we are excited by the fact that the answers are now in the question!

The CIIG Perspective

As a key stakeholder in this endeavor, the Chartered Insurance Institute of Ghana (CIIG), has recently introduced a different perspective to this narrative by provoking constructive debate with the aim of building and deepening consensus around the subject and other key areas of interest.

To this end, the 2021 CIIG Annual General Meeting (AGM) and Educational Conference, scheduled for December 8 to 11 2021, at Kwahu Nkwatia, is under the theme: ‘Increasing Insurance Penetration and Coverage, Role of Regulations, Innovations and Ethics’.

The keynote address will be delivered by an esteemed veteran Insurance Practitioner and a former Managing Director of the then Provident Life Assurance, and the current Chairman of the Insurance Awareness Coordinators Group (IACG), Mr. Wilson Tei.

Other key discussion topics for this year’s conference include the following:

• Components of the new Insurance Act 2021, (Act 1061) and their relevance to insurance professionals

• The Impact of the IFRS17 on Insurance

• Ethical Behavior and the readiness of the insurance professionals to uphold provisions in the new Insurance Act.


Meanwhile, to support in the discussions would be representatives from the NIC, Ghana Insurers Association (GIA), the Insurance Brokers Association of Ghana (IBAG), as well as a seasoned Health Insurance Practitioner, Mr. Emmanuel Oteng Tuffour.

The discussions will seek to answer some of the following mind-boggling questions:


• Should we continue to measure the performance of the insurance sector using the penetration rate?

• Will the use of the coverage of insurance be more appropriate as the figure is relatively higher and therefore has the potential to generate / engender more interest and confidence in members of the insuring public?

• Should health insurance and pensions be included in the basket of contribution that helps in permuting the penetration rate as pertains in South Africa and Kenya to reflect a more encouraging outlook?

• What will be the effect on the Ghanaian insurance professionals’ attitude toward innovation and ethics in the discharge of their duties – a fire-power approach or that of complacency as the figures may put a smile on the faces of many a practitioner just because all righteousness had been satisfied?

As to whether insurance coverage is being overshadowed by the penetration rate mindset or vice-versa, all we can say is that: We are going, CIIG knows where we are going, and we know we will get there!