Micro-insurance companies go to the poor

Feb 08, 2010

In Ghana, insurance companies now take the initiative of reaching out to low income earners, bringing insurance policies to their doorsteps. This is a complete switch from the past, where it was only big business and the wealthy that could have access to insurance policies.

In Tema, about a thirty minutes drive from the capital Accra, the Donewell Insurance Company is having an awareness campaign. At the local fish market they set up a tent and invite people to come over via loudspeaker.
Once prospective clients arrive, agents first screen their blood before they register them. The company says the process is part of their corporate social responsibility, but it seems that they do not want to take on high risk clients. People with a chronic disease cannot sign a contract with the company.

Insurance for a Cedi a day

While some agents screen prospective candidates, others meanwhile sit at tables and answer questions. One of the candidates, Comfort Aidoo, has come smartly dressed and looks ready to sign up. Starting the following day, she will have to pay one Ghana Cedi (0,7 $US) to her agent every day. Her agent will keep that money for three months after which she gets half the money back.

She says that the business she’s doing is not so profitable. “I bought the policy because I can make daily savings of just one Ghana Cedi and get quite some money after three months”, says Comfort Aidoo. But the other half of her money is saved for her as life insurance. If she pays in for 30 years, that money plus the interest will equal over 50,000 Ghana Cedi (35,000 $US). “I know that when I grow old, I will not be able to work anymore. So I believe this policy will help me”, says another man in the tent.

A lack of understanding

The rush to sign up new clients is heating up in Ghana. But not everyone that signs is fully aware of the consequences. Nicholina Asante is one of the sales agents. She says its hard work explaining the policy to her clients. “Every day I go to my clients and keep explaining the policy to them. At first they find it difficult to understand, but later they catch up.”

But understanding alone is not the only challenge. Back in Accra, Robert Dzogbenuku, Country Manager for Micro-Ensure says trust also needs to be established. “Insurance has not been doing well in Ghana because in the past, companies were reneging on paying claims.”

Small scale business, huge market potentials

Micro-insurance can lift people from poverty and helps them save for the future. The money these small business owners pay in every day is only a small amount. But all that money together is big business for the insurance companies. However, if the companies really want to tap into that money, they will have to reach out even more. Trust, coupled with transparency are the two key issues the companies will have to deal with if the industry is to be accepted by the ordinary Ghanaian.

Louis D. Mendy