Business
Ghana’s micro-insurers go mobile
Prudential and American International Group are setting up operations in Ghana, but analysts say the smaller and nimbler companies will challenge them for business. Mobile micro-insurance in Ghana is transforming the industry and attracting attention from some of the world’s biggest players.
For close to 100 years, the insurance sector in Ghana had been limited to general insurance and suffered from a perception “that insurers are there to shaft you,” says Eugène Adogla, MicroEnsure regional operations manager for Africa. Penetration and uptake rates were low. Since the discovery of oil in 2007 business has been pouring into Ghana on the premise of a richer economy, and insurance companies don’t want to be left out.
In December the United Kingdom’s Prudential bought Ghanaian insurer Express Life from private equity firm LeapFrog Investments. Prudential plans to launch its activities in April. Ghanaian insurance providers are turning the country into a hub for a range of micro-insurance products.
“There are a handful of companies, such as Star Assurance, who have invested heavily in micro-insurance and have reaped the benefits,” MicroEnsure regional director for Africa, Peter Gross, explains. One of the most celebrated products is the Tigo Family Care Insurance pioneered by telecoms company Tigo, MicroEnsure, Bima Mobile and Vanguard Life Assurance at the end of 2010. The insurance plan has insured more than one million people and received two awards.
Loyalty-based model
“The product piqued the interest of people globally and became the exemplar for loyalty-based micro-insurance,” Adogla says. Under the scheme subscribers were given free cover for themselves and one other family member based on the amount of credit the user topped up each month.
The offer lasted 12 months, after which customers could choose to pay a premium and double their cover, in what is known as the ‘freemium’ model. According to Bima, of the 500,000 customers that initially subscribed, 300,000 chose to continue with the insurance plan.
In July and August last year, both Vanguard Life and MicroEnsure left the partnership, leaving Bima, also owned by LeapFrog, to provide full administrative support. Express Life is now the sole underwriter. Prudential is not alone in its interest in Ghana. In March, finance minister Seth Terkper told The Africa Report that American International Group will be entering the Ghanaian market.
The insurer is already present in South Africa, Kenya, Uganda and Egypt. Adogla says local and regional companies still have the capacity to compete, as it is essential to use creative means to attract consumers. He said, “It’s a wide-open playing field. Anybody can win.”
Gross points out that across the continent the sector still has a way to go. He went on to say, “The Ghana example shows that growth in insurance comes from the demand side not from the supply side. … When customers see a product that works, they want more of it. Until that happens, unfortunately, many insurance markets in Africa are likely to remain relatively small.”
Source: The Africa Report