Seasoned insurance and remittance experts have stressed the insurance industry’s need to strategically cooperate with remittance providers, saying such a move will be critical in driving the country’s insurance penetration.
According to them, since remittances remain a critical social lifeline to mostly poor households in Low and Middle-Income Countries (LMICs) – which rarely have adequate insurance – the synergy between both will be a key lever in the country’s financial inclusion agenda.
These thoughts were shared during a panel discussion on the theme ‘Discovering the Linkages between Remittances and Insurance’ at the Disrupt 270 Conference organised by leading payment fintech Zeepay to mark International Day of Family Remittances (IDFR 2022).
Elaborating on the subject, Chief Operations Officer for Glico Life, Ladonna Agyeman-Buahin, in supporting the move noted that working with remittance providers will allow micro-insurance companies to harness relevant data needed for providing insurance to the target demographic.
Explaining how to access the largely uninsured segments, Ms. Agyeman-Buahin said insurance should be conveniently bundled with remittance services – allowing the senders to purchase insurance cover for their beneficiaries at the point of sending.
“What we have to do is bundle insurance with the remittance services that are received by these recipients. If we bundle the insurance and add it to the remittance, for instance, from the money that is received, just one cedi of it can go to purchase insurance. Also, we need to make the contracts that we provide very simple, as well as the process to retrieve money when the event happens. This will really widen the number of people that we have in the insurance market, and make insurance accessible and attractive to the wider market,” she noted.
Taking his turn, General Manager for Distribution at Enterprise Life Insurance, Francis Akoto-Yirenkyi, indicated that one major problem for insurance companies in growing penetration is their inability to engage with the informal sector – stating further that the aforementioned is caused by a lack of mutual trust.
“The majority of Insurance companies operate within the formal sector. It is so easy to do, but what we see now is recycling of that sector; so, year on year we sell new policies, but this never impacts the penetration rate in any way.
“The main reason why most of us are shying away from the informal sector is that it is a very difficult area to operate in, especially in the area of premium collection.
“That sector is one that has suffered big trust issues. Over the years, these groups have suffered a lot from fraudulent activities – quite a number of them have had their capital locked up in these situations, and thus it has become a big thing,” Francis Akoto-Yirenkyi revealed.
He however believes that integrating insurance and remittances could help salvage the situation.
“One avenue insurance companies have to penetrate this market is by partnering with institutions these groups trust – and that is the remittance service providers. They trust them, and they have the platform and technology to administer insurance services. If indeed insurance companies want to penetrate and increase penetration, that is where the opportunities are and where we need to be looking,” he advocated.
Product Manager for Financial Institution and Insurance at Zeepay, Loretta Ofori-Ani, said micro-insurance has failed to gain traction as the emphasis has gradually shifted to insurance serving as an investment tool providing guaranteed, periodic returns, as opposed to its core mandate of coverage when mishaps occur.
Explaining, she said: “Within the Ghanaian Insurance Industry, what we have seen over time is that insurance is geared more toward protection rather than cover. Protection simply means most of the products available are in an investment form, such that a person purchasing the insurance pays a premium over time and then is given a return after a certain time of years – as compared to cover, which is more of a policy.
“For instance, in a situation of hospitalisation, that cover is really catering for the hospital expenses. With partnerships between Zeepay and other remittance providers, Insurance companies can come up with products that will speak to specific needs of people; and once we are able to do that, penetration rates will go up.”
Managing Director at Hollard Life Assurance, Nashiru Iddrisu, said integrating insurance with remittance also goes a long way to provide channels for risk management.
“There is a huge linkage between remittance and insurance, considering how much contribution it adds to the country’s GDP; and we will be shooting ourselves in the foot if we decide to sit down and say we have nothing to do with remittances.
“The sender and the receiver have needs they have to protect, and the very reason why that remittance is sent is why you need insurance. You send it to meet their SDG goals, wherein we have feeding, education and hospitalisation,” Nashiru Iddrisu remarked.