Micro, agric insurance to get legal backing

The National Insurance Commission (NIC) is hoping that the development of agric and micro insurance products in the country will receive a boost when the new Insurance bill is passed.

Currently, there is no legal backing to guide insurers in the development of micro and agric insurance products, which has made it difficult for people engaged in agriculture and micro businesses to insure their activities against uncertainties.

The Deputy Commissioner of the NIC, Simon Nerro Davor, explained to the B&FT that the Insurance bill is aimed at addressing some of the challenges insurers face in developing products for some critical sectors of the economy.

“The new Insurance bill will address some of the limitations in the present insurance laws. Micro insurance and agric insurance, which are not covered in the Act, will now be covered when the Insurance bill is passed so that products can be developed for agric and micro businesses,” he said.

Consequently, the NIC is facilitating a meeting for a 10-member team in Akosombo between September 5 and 6 to come up with recommendations for inclusion in the bill as part of the consultative processes toward enactment of the new Insurance law.

This follows advice from Cabinet, which was studying the bill, to the NIC to widen the consultative process before the bill is sent to Parliament for the necessary amendment and approval.

The NIC said the 10-member team, comprising representatives of the NIC, Ghana Insurers Association, Ghana Insurance Brokers Association and National Association of Insurance Agents, is to submit its report by September 20 to pave the way for a public forum on the bill to be organised.

Micro and agric insurance are projected as the new prospects for the insurance industry in view of the critical importance of agric and micro enterprises to the economy.

The agricultural sector has lost its position as the biggest contributor to the country’s GDP, yet it still offers more jobs to people than any other sector. Therefore, the new push for it to receive insurance coverage options can further boost food output.

At the heart of the micro-insurance bill being put together by the NIC in Ghana is the creation of a viable crop insurance scheme to cover farmers against crop-failure and financial losses caused by extreme weather conditions.

B&FT understands that after passage of the insurance bill, the NIC will give priority to licencing insurance companies with specialisation in micro-insurance and agricultural insurance.

The NIC believes micro-insurance holds the key to the future growth of the insurance industry, having proven in some African countries to be one of the best models for insurance penetration in developing markets. Through micro-insurance, insurers in South Africa, Namibia, Kenya and Uganda have succeeded in extending their services to small-scale businesses in commerce as well as in agriculture.

According to industry figures, Ghana’s current insurance penetration rate is estimated at 1.5% in a population of about 26 million. In Africa, outside of South Africa, only seven countries have insurance penetration above 2%.

The general consensus is that if insurers in Ghana stepped out of their comfort zone and dared to cover risks associated with doing business in non-traditional sectors, it could mark the beginning of massive insurance penetration in the country.

Additionally, passage of the new insurance bill is expected to make it easier for banks to expand credit to the agriculture sector, in particular, and the informal sector in general.

Over the years, the low volume of credit to the agriculture sector has been attributed to the perceived risks linked to the sector’s over-dependence on rain for crop production and improper use of fertiliser, a situation which has led banks to charge high interest rates on loans and advances to the agriculture sector.