Mar 17, 20205 min read

Ghana's General Insurance Outlook For 2019

SIC returns to the top whiles Hollard moves from fifth to third.

In creating a new world of opportunity for individuals, businesses and the society, insurers can no longer move of the same traditional products and services, and expect to succeed. Customers, investors, and employees demand innovation from insurance companies. It is only by recognizing opportunities and challenges, and responding quickly that insurers will continue to be competitive.

In the past decade, SIC insurance has been the market leader in the domestic general insurance industry until 2018 when Enterprise Insurance became the market leader for the first time with a market share of 14.6%, and 14% for the former. As at the fourth quarter of 2019, the unaudited data on the general insurance industry indicated that SIC insurance resumed its leadership in terms of the market share of the domestic industry.

A 21st-century enterprise will deliver the best customer experience, leveraging data collected from customers to learn and personalize the experience. The general insurance growth predictions may be tempered by several evolving elements in the macroeconomic environment such as the exchange rate fluctuations, the slowing economic growth in China and the outcome of the 2020 elections. The new capital requirement for insurers cannot be left out as well.

The Insurance Act, 2006, Act 724 section 80 and 81 mandates insurance companies to prepare and lodge their accounts and financial statement with the National Insurance Commission every quarter and every financial year. This article considers the unaudited data on the general insurance industry in terms of gross premiums generation, market share, claims paid and investment, putting 2019 in perspective.

In 2019, the general insurance sector generated total gross premium income of Ghc1,558,891,893 which represents 1.2% increase as compared to Ghc1,271,798,928 in 2018. Out of that amount, Ghc330,435,769 which represents 0.9% decrease as compared to Ghc358,660,408 in 2018, was used to pay claims in order to help businesses and individuals through difficult moments in losses and damages. Even though the cedi depreciation constituted a challenging environment in the industry, the gross premiums in most non-life businesses that are driven by the levels of economic activity increased. The article covers twenty-nine domestic insurers in the country.

Following the same structure of my past articles, this writing looks into some key aspects of the performance of the general insurance industry: the underwriting performance of the general insurance businesses, which depends on the evolution of gross premiums and claims payments; the investment performance of insurers; the market share dynamics.

Gross Premium

Gross premiums continued to rise in the general insurance sector irrespective of the low insurance penetration. The aggregate trends for the sector may however hide differences in dynamics demonstrated in each type of insurance policy and the risk insured. Additionally, substitution effects may exist between insurance products, banking products and a shift from guaranteed life insurance products towards unit-linked products, which transfer investment risk from insurers to policyholders.

According to the unaudited data, the total gross premium generated at the end of 2019 was Ghc1,558,891,893 representing a 1.2% increase as compared to Ghc1,299,288,364 in 2018. With this amount, SIC insurance generated gross premium of Ghc211,514,138, followed by Enterprise insurance (207,058,830), Hollard insurance (123,559,788). Star Assurance (121,652,887), and Glicogeneral (113,805,282). The remaining 24 insurers generated Ghc781,300,968 with Multi insurance having the lowest gross premium generation of Ghc2,073,180.

In 2018, Hollard insurance was at the fifth position with a gross premium generation of Ghc96,819,681 but is now occupying the third position. Glicogeneral also moved from sixth position with gross premium generation of Ghc74,913,380 in 2018 to the fifth position in 2019.

Market Share

For so many years, SIC insurance has always been the market leader in terms of market share until 2018 when Enterprise Insurance became the leader for the first time with a market share of 14.6%, and 14% for the former. After one year, SIC insurance has resumed its leadership with a market share of 14% and 13% for Enterprise Insurance.

The market share ladder at the end of 2019 was followed by Hollard Insurance Gh. Ltd. – 7.9%, Star Assurance Co Ltd – 7.8%, Glico General Insurance Company Limited – 7.3%, Vanguard Assurance Company Limited – 6.7%, Ghana Union Assurance Company Limited – 6%, Activa International Insurance Company Limited – 5%. The remaining 21 general insurance companies accounted for 33% of the industry market share. The insurers with the least share are Serene insurance, Bedrock insurance, and Multi insurance each having 0.39%, 0.14%, and 0.13% respectively.

Claims Payment

The most sensitive area in insurance where Ghanaians have a bad perception about the industry is claims. Growth in premium generation will make insurance companies have enough liquidity to pay claims as quickly as possible. The total claim amount paid by all the insurers in 2018 was reduced from Ghc358,660,408 to Ghc330,435,769 in 2019.

For the past decade, Enterprise insurance had been paying claims more than any other domestic insurer and 2019 was not different. In 2018 the insurer paid Ghc53,535,951 in claims settlement, but was increased to Ghc62,278,045 in 2019. This was followed by Star Assurance (Ghc36,354,685), Vanguard Assurance (Ghc29,837,078), Glicogeneral (Ghc20,484,064), and Phoenix insurance (19,666,410). The remaining 24 insurers spent GHc161,815,487.

Even though SIC insurance generated a gross premium of Ghc211,574,138, the amount used to settle claims was Ghc18,451,776.

Investment

All insurers, irrespective of whether they engage in life, non-life insurance activities, or both generally achieved positive real investment rates of returns, which may be driven by gains on equity markets. Life, non-life and composite insurers (i.e. insurers that operate in both the life and non-life insurance sectors) continued to invest most of their assets in bills and bonds and are therefore still exposed to the challenges associated with the interest and exchange rates environment. Despite these challenges, the insurance industry remained profitable. All types of insurers exhibited positive returns on equity (ROEs).

The total investment portfolio managed by the general insurance sector in 2018 was Ghc1,386,691,397. In 2019, it was increased to Ghc1,646,694,790. Out of that figure, SIC insurance has an outstanding investment portfolio of Ghc318,527,312, followed by Star Assurance (308,128,856), Enterprise Insurance (150,442,816), Hollard insurance (86,252,065) and Ghana Union Assurance (80,592,456). The investment portfolio for the remaining 24 insurers combined was Ghc702,751,235 with Bedrock insurance having the lowest investment portfolio of Ghc7,187,998.

Conclusion

The assessment of the general insurance sector reveals the structure of competition within the insurer's operating environment and competitive position in the industry. There is a direct relationship in premium generation and market share, and not claim payment as it was in 2018. Even though Enterprise insurance paid huge amount of claims, they were unable to maintain their market share.