Ghana shows how to sell insurance via mobile money

Ghana’s smaller size gives it a geographical advantage over Nigeria in terms of selling insurance. But mobile money makes the last mile to the remote customer easier and economically viable even in larger countries.

In Ghana there has been “more of a push from the regulator and the government for increased penetration,” says Tom Gray, an African risk consultant with Menas Associates in London. “Mobile insurance, bancassurance and micro-insurance are areas that are seeing growth.”

• In 2015, the central bank in Ghana overhauled the regulatory framework for mobile money by letting operators run services through existing subsidiaries. Results quickly followed: the 2017 Global Findex from the World Bank showed Ghana as among the fastest-growing mobile-money markets in sub-Saharan Africa. In May 2018, Ghana allowed interoperability, making money transfers between mobile networks and banks possible.
• By 2017, Ghana had over 11 million active mobile-money accounts, mostly provided by South Africa’s MTN. Through these accounts, Ghanaians can open savings accounts or even buy government treasury bills by phone. Other international players have jumped on board. In September 2017, emerging markets insurance company BIMA partnered with Vodafone to provide life insurance to Ghana’s fishing communities.

Nigeria, by contrast, does not offer the same freedom. The GSMA association, which represents mobile operators worldwide, says the country’s regulatory framework has allowed only a few players to offer mobile-money services, meaning lower investment and restricted choice. Major mobile-money players such as MTN are hoping that lessons have been learned from Ghana.

MTN hits the buffers

MTN is Nigeria’s biggest carrier with more than 50 million subscribers, and the company said in March that launching a mobile-money offer in Nigeria is a key target for 2019. MTN’s plans for an IPO of its Nigerian unit were held up after the Nigerian authorities hit the company with a $2bn tax bill last September. That followed a demand from Nigeria’s central bank in August 2018 that MTN repatriate $8.1bn to Nigeria, arguing that the money had been moved abroad in breach of foreign-currency regulations.

The repatriation case was resolved, but MTN continues to contest the tax bill. The company says it can’t come up with a value for the planned IPO while the dispute is ongoing.

Capital requirements

Nigeria has also lagged behind Ghana in increasing capital requirements for insurers, Gray says. The result is “poor capitalisation of the market players”. The oil and gas industry would have a been a promising area for the provision of local insurance, Gray says, but the “reality is that many local players lack the capital or expertise to underwrite complex oil and gas activities”.

In Nigeria the insurance sector is fragmented and needs consolidation, but Gray doesn’t expect this to happen any time soon: “There are too many small players trying to undercut each other.” Fake insurance, particularly in motor insurance, is rife, he says, contributing to a poor public perception of the industry.

Nigeria carried out its own reforms in 2018 in a bid to harness the potential of mobile money to drive financial inclusion. Much will rest on implementation. According to PwC, in 2017 Ghana’s insurance penetration rate (value of premiums as a percentage of GDP) was still very low at 1.1%, but well ahead of Nigeria at 0.3%. Ghana is targeting an insurance penetration rate of 10% of GDP by 2021.

Bottom line: Mobile money has proved itself a catalyst in the battle to provide insurance. Making life harder for mobile-money providers keeps insurance out of reach for most Nigerians.