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Assessing the Life Insurance Industry in Ghana

Assessing the Life Insurance Industry in Ghana

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Published by Alexander Decker
The International Institute for Science, Technology and Education (IISTE). Science, Technology and Medicine Journals Call for Academic Manuscripts
The International Institute for Science, Technology and Education (IISTE). Science, Technology and Medicine Journals Call for Academic Manuscripts

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Published by: Alexander Decker on Aug 11, 2014
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European Journal of Business and Management www.iiste.org ISSN 2222-1905 !aper" ISSN 2222-2#$9 %nline" &ol.'( No.21( 201)
Assessing the Life Insurance Industry in Ghana
*ran+is Boadu
 (r. Elia/et womo-*ouo
(Josep ofi Boa3e
(4l/ert %pou *rimpong
 1.Institute of Entrepreneursip  Enterprise e6elopment( umasi !ol3te+ni+( !% /o7 #5)(umasi( 8ana 2.S+ool of Business and Management Studies( umasi !ol3te+ni+( !% /o7 #5)(umasi( 8ana , E-mail of te +orresponding autor linna+us:3aoo.+om
Insuran+e as a +ru+ial role to pla3 in e6er3 e+onom3. In 8ana( tere a6e /een a num/er of disasters resulting in loss of life and propert3. ;is paper attempts to assess te life insuran+e industr3 in 8ana troug a sample of $$0 +ustomers of life insuran+e +ompanies operating in te umasi Metropolis. ;e stud3 re6ealed tat life insuran+e +ompanies find it diffi+ult to settle +laim pa3ment and su/<e+t +ustomers to long pro+essing period wile some settlement end up in +ourt. =0> of te +ustomers do not re+ei6ed feed/a+ after lodging +omplains. ;ese insuran+e +ompanies owe6er +olle+t teir premium promptl3.
insuran+e( effe+ti6eness( satisfa+tion( +laim( premium
1. Introduction
Insuran+e in6ol6es pooling funds from man3 insured entities nown as e7posures" to pa3 for te losses tat some ma3 in+ur. It offers prote+tion against te e+onomi+ impa+t of an untimel3 deat( ealt( a++idents( funeral among oters. Insuran+e pla3s a +ru+ial role in te fun+tioning of modern e+onomies. *or e7ample( te insuran+e  penetration le6els a++ounted for ).# > of te gross domesti+ produ+t 8!" of India in 2011 and furter grew to ' > in 2012 Bari( 2012". ;e situation in 8ana is ?uite different as onl3 5 > of te population as an insuran+e produ+t in te form of prote+tion for temsel6es( teir /enefi+iaries and possessions NI@( 2011". ;e industr3As +ontri/ution to te +ountr3As gross domesti+ produ+t o6ers around 1 >( as +ompared to Sout 4fri+a 1).# >( Nami/ia =.$ >( en3a 2.# >( Nigeria 0.' > and Mala3sia ).# > Swiss e Sigma eport( 2012". 8anaAs insuran+e istor3 dates /a+ in te +olonial era in 192)( wen o3al 8uardian Enterprise( +urrentl3 nown as Enterprise Insuran+e @ompan3 Cimited was esta/lised. In 1955( 8old @oast Insuran+e @ompan3 was formed as te first indigenous pri6ate insuran+e +ompan3 followed /3 State Insuran+e @ompan3 in 19'2. B3 te 3ear 200#( li+ensed insuran+e +ompanies witin te +ountr3 ad in+reased to $9( gi6en te /readown as 1= in te life insuran+e and 22 for non life insuran+e. Insuran+e +ompanies in 8ana are in tree +ategories namel3D Cife Insuran+e( Non-Cife Insuran+e and @omposite Insuran+e wi+ is te +om/ination of life and non-life insuran+e. ;e pla3ers of te insuran+e maret +onsist of insuran+e +ompanies and poli+3 olders insurers". ;e insuran+e maret is di6ided into te Cife and Non-life insuran+e .Ea+ maret as its suppl3 and demand. ;e demand side of te Cife maret is +onstituted /3 te poli+3 older wo wants +ompensation upon deat( terminal illness or +riti+al illness( wile te Non-Cife maret demand sie is formed /3 te automo/ile and ome ownersA poli+3 olders. ;e suppl3 side of /ot marets is populated /3 insurers wo see to indemnif3 poli+3 olders. Insuran+e maret as tremendous effe+t on te national e+onom3 /3 +reating <o/s( pa3ing ta7es to go6ernment for oter de6elopmental a+ti6ities and prote+ting te +itienr3 from loss of properties among oters. ;e 19#9 insuran+e law( !N@ Caw 229( esta/lised te National Insuran+e @ommission NI@" 8adan( 2010"( as te autoritati6e /od3 in +arge of insuran+e issues in 8ana. It is mandated to ensure effe+ti6e administration( super6ision( regulation and +ontrol a+ti6ities as ena+ted in te Insuran+e 4+t( 200' 4+t =2)". ;e +ommission was set up mostl3 to deal wit te numerous +omplains of +ustomers o6er te 3ears +on+erning te t3pe of ser6i+es te3 re+ei6ed from te insuran+e +ompanies. @ustomers are 6alua/le assets for an3 organiation as te3 are te ultimate destination of an3 produ+ts or ser6i+es ;apa( 2010". ;e su++ess of an3 organiation depends upon te satisfa+tion of te +onsumers sin+e te3 are te end users of organiational  produ+ts or ser6i+es and +an de+ide to sta3 or swit+ to oter /rands /ased on teir satisfa+tion. ;e +ustomer is te onl3 sour+e of te +ompan3As present profit and future growt 8ra3  B3un( 2001". ue to ig degree of glo/aliation of marets and intense +ompetition among te pla3ers in te insuran+e industr3( more attention need to /e paid towards +ustomer satisfa+tion and retention if te ma<or pla3ers do not want to lose teir e7isting +ustomers. ;e e3 sustaina/le +ompetiti6e ad6antage in toda3As +ompetiti6e /usiness en6ironments lies in deli6ering ig-?ualit3 ser6i+e tat result in satisfied +ustomers !arasuraman( Berr3  eitaml( 1991". 4ddressing +ustomer needs ad /e+ome a great differentiator( te most powerful +ompetiti6e weapon wi+ man3 leading ser6i+e organiations possess at( Sirg3  oseno( 199#". espite te esta/lisment of NI@( 8anaian insuran+e +ompanies are often a++used of /ea6ing as if te3 are doing a fa6our to teir +ustomers. ;e insuran+e industr3 suffers most from negati6e image as a result of lower +ustomer satisfa+tion per+eption NI@( 200#". ;e general pu/li+ as different per+eption on life assuran+e  poli+3. Most of te time( +lients +omplains of ina/ilit3 of insuran+e +ompanies to pa3 prompt +laims( sometimes
European Journal of Business and Management www.iiste.org ISSN 2222-1905 !aper" ISSN 2222-2#$9 %nline" &ol.'( No.21( 201)
15 e6en den3ing tem of te +laims and ultimatel3 ending up in te +ourt of law. F4t te 3ear ending 200#( two undred and fort3-fi6e 2)5" +omplaints were re+ei6ed from te pu/li+ against insuran+e +ompaniesG NI@( 4nnual eport( 200#". It is 6er3 +ommon to ear people remaring tat insuran+e +ompanies are ?ui+er in re+ei6ing premiums /ut slower wen it +omes to +laims pa3ment. Insuran+e +ompanies a6e alwa3s /een  /lamed for late deli6er3 of ser6i+es. It is +ommonpla+e to ear people +omplaining of late deli6er3 of poli+3 do+uments( renewal noti+es or e6en undue dela3 in responding to +ustomersA re?uests. @onsidering te numerous insuran+e +ompanies in 8ana and te eas3 a++ess to e6er3 indi6idual( +ustomers are  /e+oming intolerant and easil3 /rea up teir relationsip as pro/lems arise. ;is as led to mo6ement of  potential +ustomers from one +ompan3 to anoter owing to ill-treatment. @ustomers in te insuran+e industr3 swit+ teir wole /usiness unlie tose in tele+ommuni+ation wo partl3 swit+ to a +ompetitor Ed6ardsson( 8ustafsson  oos( 200)". @ustomer retention is a +ore +on+ern of e6er3 organiation. ue to tis reasons( te satisfa+tion of te +onsumers /e+omes priorit3 for an3 organiations in+luding tose in te insuran+e industr3. ;e purpose of tis stud3 is to assess ow life insuran+e industr3 in 8ana is performing. ;e stud3 e7plores te e7tent to wi+ +laims assessment( premium pa3ment( +ustomer +omplain issues are affe+ting life insuran+e industr3 in 8ana. %ur findings +ould enri+ dis+ussions of appropriate poli+3 framewor tat +ould stimulate insuran+e se+tor of te e+onom3. ;e paper pro+eeds wit te o6er6iew of insuran+e industr3 and +ustomer e7pe+tations( metodolog3 and data issues( reporting and dis+ussion of empiri+al results and ten +on+lusion.
2. Overview of Insurance Industry and Customer !"ectations
Insuran+e is a pooling of riss /3 indi6iduals( were part of te pa3ment of te man3 is used to pa3 to te few wo suffer losses  Se/i3am( 2005D e<da( 1992D 8art  a6id( 1990D ;ro7el  @omi+( 19#$". 4nderson and Brown 2005" opined tat under a formal insuran+e arrangement( ea+ insuran+e poli+3 pur+aser poli+3older" still impli+itl3 pools is ris wit all oter poli+3olders. Insuran+e is designed to meet te finan+ial well-/eing of an indi6idual( +ompan3 or oter entit3 in te +ase of unpredi+ted losses. Some forms of insuran+e are +ompulsor3 wile oters are optional Ho3oae eipers( 1999". Insuran+e operation in 8ana started far /a+ in 1955( and te maret is /e+oming more 6i/rant and +ontinues to mae progress espe+iall3 /etween 200) and 2009 NI@( 2009". It as +ontri/uted immensel3 to te growt of te *inan+ial Ser6i+es Se+tor and elped  propelled te e+onom3 of 8ana for te past 3ears 4ll 4fri+a 8lo/al Media( 2010". ;e industr3 as a uge  potential( wi+ as /arel3 /een s+rat+ed. !rospe+ts in life /usinesses are 3et to /e full3 tapped. Benefits tat a++rued from life insuran+e industr3 to te nation( organiations and indi6iduals in+lude te use of life insuran+e  poli+ies as +ollateral se+urit3 for /an loans o6erdrafts( and mortgage as well as pro6ision for retirement NI@( 200'". @ustomers in tis industr3 e7pe+t a lot from teir insurers or ser6i+e pro6iders. ;e3 e7pe+tD prompt deli6er3 of +ompetent and effi+ient ser6i+es paramount among wi+ is pa3ment of +laims( nowledgea/le and ser6i+ea/le frontline staff tat are e6er prepared to gi6e information on re?uest and relia/le feed/a+ among oters 4marte3-&ondee( 200=". nderstanding +ustomer e7pe+tations is an important and essential element in ser6i+e deli6er3. 4++ording to eitaml( Bitner and 8remler 200$"( +ustomer e7pe+tation is /asi+all3 a /elief a/out te ser6i+e deli6er3. Mainl3 two ma<or t3pes of e7pe+tation are predominant in +ase of life insuran+e  pur+asing s+enario Bari( 2012". ;ese are ideal or desired ser6i+e and ade?uate ser6i+e. %f +ourse /ot tese ser6i+e e7pe+tation 6aries from produ+t to produ+t( /usiness to /usiness( ad6isor to ad6isor and industr3 to industr3 Bari( 2012". @ustomer satisfa+tion is an o6erall attitude towards a produ+t or an organiation tat  pro6ides ser6i+es or +ustomerAs rea+tion towards te differen+e /etween +ustomerAs e7pe+tation and wat is re+ei6ed +on+erning te satisfa+tion of needs( desires or goal Hansemar  4l/inson( 200)". 8ood +ustomer 6alue +an /e a+ie6ed onl3 wen ser6i+e ?ualit3( produ+t ?ualit3 and te 6alue-/ased pri+es e7+eed te +ustomer satisfa+tion. If one of tese is negle+ted te +ustomer satisfa+tion will suffer a tremendous set/a+. E6en if pri+e and te produ+t are good /ut te ser6i+e is /ad( te entire image of te +ompan3 produ+t will /e /ad and te +ustomer will +ertainl3 not /e app3 M+Neil  @rotts( 200'". 4++ording to Ho3er and Ma+lnnis 2001" +ustomers tat are not satisfied ma3 de+ide to stop patroniing a /usiness to pur+ase insuran+e produ+ts and ser6i+es( te3 ma3 +omplain to a tird part3 or te /usiness organiation and te3 ma3 also gi6e negati6e word of mout. @ustomer dissatisfa+tion usuall3 +omes a/out as a result of poor /usiness management and /usiness  pra+ti+es Broad/ridge Marsall( 1995". Ndu/iasi 2005" and !feifer 2005" ad posited tat te +ost of ser6ing a lo3al +ustomer is fi6e or si7 times less tan te +ost of a+?uiring a new one. ;is is line wit te 6iew e7pressed /3 als et al. 2005" wen e said tat it is +eaper to loo after e7isting +ustomers tan a+?uiring new ones.
Ser6i+e firms must terefore do someting a/out it in order to pro6ide good +ustomer ser6i+eD enan+e +ustomer lo3alt3 and repeat patronage of ser6i+e. Ser6i+e failure as possi/l3 per+ei6ed /3 +ustomers is a ma<or +on+ern for te ser6i+e firm /e+ause of its potential effe+ts on te ser6i+e out+ome 8ustafsson( 2009". Ser6i+es +an onl3 /e e7perien+ed( /e+ause it is +onsumed at te point of pur+ase Boadu( womo-*ouo( Boa3e(  *rimpong 201)". 4++ording to N3er 2000"( good andlings and positi6e responses to +ustomersA +omplaints +an in+rease +ustomer lo3alt3 to ser6i+e industr3. Broad/ridge and Marsall 1995" posited tat
European Journal of Business and Management www.iiste.org ISSN 2222-1905 !aper" ISSN 2222-2#$9 %nline" &ol.'( No.21( 201)
1' +onsumers +an resort to so man3 different inds of a+tions in settling dissatisfa+tion. *or instan+e( +ustomers +an tae pri6ate or pu/li+ a+tion Ba+lund  Holmg6ist( 200'". Insuran+e pro6iders need to /e +areful and pro6ide ade?uate ser6i+e to teir 6arious +ustomers to a6oid an3 misunderstanding tat +an end up in +ourt for redress. ;is stud3 e7amines ow life insuran+e industr3 is performing in 8ana.
#. $ateria%s and $ethods
3.1 Area of Study
;is stud3 was +ondu+ted witin Cife Insuran+e @ompanies in umasi Metropolitan 4ssem/l3 to a6e an in-dept understanding and appre+iation of ow +ustomers assessed te performan+e of te industr3. It is also aimed at identif3ing inno6ati6e measures and te+nolog3 deli6er3 +annels tat life Insuran+e @ompanies a6e deplo3ed to ensure +on6enient insuran+e. ;e stud3 was limited to Cife 4ssuran+e @ompanies in umasi metropolis. umasi is te +apital of te 4santi region of 8ana and terefore +onsidered appropriate /e+ause most insuran+e +ompanies a6e /ran+es lo+ated in it( to ser6e te middle /elt.
3.2 Population
;e target population for tis stud3 +onsists of all +ustomers of life assuran+e industr3 wit /ran+es in umasi Metropolis as at Ma3( 201$.
3.3 Sampling Design, Size and Procedure
4 sample sie of tree undred and tirt3 $$0" was sele+ted from te +ustomers of some life assuran+e +ompanies operating in umasi Metropolis as at Ma3( 201$. ;e +ompanies are ; life insuran+e( ME; life insuran+e( 8li+o life insuran+e( !ro6ident life insuran+e( Kualit3 life insuran+e( Star life insuran+e( !oeni7 insuran+e( onewell insuran+e( SI@ life insuran+e( E7press life insuran+e and Enterprise life assuran+e. 4ll te ele6en 11" /ran+es of te life assuran+e +ompanies in umasi were +onta+ted for te stud3. In ea+  /ran+( tirt3 +ustomers were sele+ted using purposi6e sampling. ;is metod was +osen /e+ause te resear+ers targeted +ustomers of te life assuran+e +ompanies. ;is made te sample sie to /e tree undred and tirt3 $$0" tat is $0 +ustomers in e6er3 /ran+ multipl3 /3 11 insuran+e firms". ;e resear+ers emplo3ed pro/a/ilit3 te+ni?ue to sele+t sample respondents for in+lusion in te sample for te stud3. ;e3 used random sampling te+ni?ues to sele+t all te elements. !rimar3 data for te stud3 were o/tained wit te aid of ?uestionnaire administered personall3 to te respondents. ata +olle+ted in+luded +laim assessment( assessment of premium pa3ment( +ustomer +omplaining issues( and +ustomer swit+ing in insuran+e +ompanies. Information on general +ara+teristi+s of +ustomers were also o/tained. ata gatered were anal3sed using des+ripti6e statisti+s. ;e sur6e3 data were +oded( 6erified and +leaned up( and ten entered and anal3sed using te S!SS programme. ;e findings of te stud3 were presented using appropriate ta/les and +arts to ensure eas3 interpretation.
;e sur6e3 distri/ution period of tis paper lasted from Ma3 to Septem/er 201$. 4 total of $$0 ?uestionnaire were +olle+ted.
&. 'esu%ts and (iscussion
4.1 General Caracteristics of te !espondents
;e general +ara+teristi+s of te sample are reported in ;a/le 1. In terms of gender distri/ution( male respondents of te o6erall sample are iger tan female respondents /3 )5.)' >. In terms of age( te result indi+ates tat ma<orit3 ='.$' >" of te respondents were witin te age group of 21-50. ;is means tat te +ustomers are relati6el3 3oung and +an +ontri/ute towards effe+ti6e insuran+e s3stem in te e+onom3 o6er a longer period. In terms of edu+ational /a+ground( te +ustomers of life insuran+e +ompanies tended to /e igl3 edu+ated( te ma<orit3 ad eiter a first degree or iger national diploma ?ualifi+ation. ;is means tat life insuran+e industr3 as a/le and igl3 edu+ated +ustomers wo understand te operations of te industr3. ;is in te long run will elp transfer nowledge and ideas easil3 among /ot +ustomers and mem/ers of staff. @laim( premium( +omplaining issues and swit+ing 6aria/les are e7amined separatel3 in te following se+tion.
4.2 Claim Assessment "ssues
;is se+tion of te paper presents an anal3sis of findings of te sur6e3 wi+ e7plored ow insuran+e +ompanies in 8ana deal wit teir +laims.
;e respondents +laimed tat pro6iding te do+uments posed a +allenge and terefore one of te ma<or +auses of te dela3. ;e3 are not made aware of te +orre+t do+uments re?uired in times of disaster. 4gain( te3 find it diffi+ult to gater all te do+uments re?uired /3 te insuran+e +ompan3. ;e3 ma3 not a/le to get all te  preferred +ertifi+ates and do+uments due to dela3 from go6ernment offi+es and oter state agen+ies. E7amples of su+ do+uments in+lude deat +ertifi+ate in +ase of Muslims( a testimon3 from +ief Imam"( identifi+ation proof of te insured and nominee( original poli+3 /ond( postmortem report and potograp of te person at te a++ident pla+e( first information report( among oters. It is impossi/le for a +ountr3 lie 8ana to pro6ide te  potograp of a person at te a++ident site.
4s indi+ated in ;a/le 2( '$.') > of respondents reported tat te3 see +laim pa3ment /3 life insuran+e

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