The National Insurance Commission (NIC) says it has advanced moves to introduce a life insurance package to provide regular pay for pensioners.
According to the Commission, it is taking steps to help the industry build the needed capacity to start an ‘annuities market.’
Speaking at the launch of Allianz Life Insurance Company, the Deputy Commissioner of Insurance, Michael Kofi Andoh said, “The next batch of pensioners will have the option to buy annuity products to provide them with regular incomes until death.”
The first batch of people to retire under the current three-tier pensions system takes place next year. This batch of people will receive lump sums from their tier two pensions.
Out of this lump sum, Mr Andoh says his outfit has advanced moves to establish a ‘tailored policy’ such that pensioners can receive regular incomes.
He said, “The NIC is due to publish in the next few weeks, the requirements which life insurance companies desirous of writing annuities, must meet.”
Actuarial Capacity Development Strategy
Meanwhile, Mr Andoh said the NIC, in collaboration with the German Development Cooperation (GIZ), has taken steps to plan for the adequate supply of qualified actuarial staff for the insurance industry.
“The Actuarial Capacity Development Strategy which was developed as part of this collaboration is currently under implementation. It was in this vein that the NIC’s Governance and Risk Management Framework required all insurance companies to have in-house actuarial functions,” he said.
According to him, the NIC is planning further collaborations to improve the capacity of the in-house actuarial function holders to contribute to the efficiency and financial soundness of their respective companies.
The Deputy Commissioner also says his outfit has gathered relevant data and is collaborating with relevant experts to produce a local Mortality Table.
According to him, this seeks to facilitate effective underwriting of life risks.
“Currently, the industry relies on South African and European Mortality Tables which tend to be problematic because of the significant differences even between the demographics of Ghana and South Africa,” he added.
Life insurance market
Mr Andoh says the total premium volumes of the Ghanaian life insurance market have steadily grown over the past years, averaging an annual growth rate of 23% from 2013 till date.
He said, “It is currently a little over one billion Ghana cedis.”
Meanwhile, he believes the market is still largely untapped. He says there is a lot of room for growth in the provision of innovative products that are relevant and responsive to the needs of clients.
He has urged life insurers to make ‘progressive inroads and ‘design products’ which serve the needs of the largely ‘uninsured’ and ‘under-served’ population and roll out products that mitigate the risk exposures of low income and informal sector.
“Population growth trends, the emergence of the middle-income class, rising incomes and the relatively low insurance penetration rate in Ghana means there are growth opportunities and potential.” Mr Andoh said.
Mr Andoh says the predominance of small and lowly-capitalized firms threatens the said opportunities and potentials which often lead to excessive competition around price, rather than service. This, he bemoans, erodes public trust.
“Another effect of low capitalization is that it hinders innovation and the deployment of technology to improve the entire insurance value chain.”
The Commissioner of Insurance, Justice Yaw Ofori, however, earlier indicated to JoyBusiness that due to some industry challenges, especially premium or price undercutting, an increase in the minimum capital requirement for the industry would yield no result.
Hence, he hinted that a new minimum capital would not be introduced any time soon.
Mr Andoh says the NIC has taken steps to protect consumers and create an enabling environment that encourages the development of relevant and responsive products, and improve public trust in insurance.
He says the financial services sector worldwide is becoming increasingly digitized.
“In Ghana, the implementation of the interoperability of the payment systems is expected to have a significant impact or even completely revolutionalise the financial services ecosystem.”
He, therefore, urged insurance companies to research into and begin to make the needed investments to enable them to remain relevant and catalyse the improvement of access to insurance for the under-served and the untapped market.