For the first time in the history of any insurance company in Ghana, GN Life has managed to make an underwriting profit during its first full year of operations.
This is a major feat for any life insurance company to attain since the huge financial capital needed to set them up in the initial stages coupled with management expenses, makes it practically impossible for them to make an underwriting profit during its first full year of operations.
Chief Executive Officer (CEO) of GN Life, Fiifi Simpson, believes the company chalked this success as a result of the largely successful Groupe Nduom (GN) brand.
He revealed that the bancassurance relationship which GN Life established with the People’s Bank—GN Bank, another member of the Groupe Nduom with over 270 branches nationwide, made it possible for them to distribute their products through that partnership thereby reducing their cost of distribution.
After barely two years of existence, Mr. Simpson indicated that the company was positioning itself to be part of the top five life assurance companies in terms of profitability within the next five years.
In addition, GN Life wants to be part of the top three companies with a huge brand presence and also wants to become the market leader having between 15 to 18 per cent of the insurance market share.
GN life was given its operational license by the National Insurance Commission (NIC) in September 2014, and started operations in July 2015, thus 2016, marked its full year of operating as a company.
Below is the full interview with the CEO of GN Life – Fiifi Simpson
Ques: GN Life is virtually two years but it seems to be making lots of inroads. What is the secret or reason?
Ans: GN Life is almost two years old. We were given our operational license by the National Insurance Commission in September of 2014 and started operations in July 2015 and thus 2016 was our full year of operations as a company. We are making some inroads in the insurance industry and the reason is that as a company in our first full year we have managed to make underwriting profit and that is rare for a first full year in the life of an insurance company. And I believe that this will be the first in our history as an industry. There is a reason for this. Traditionally, when a life assurance company is set up the initial costs are high, in the sense that the life assurance company needs to set up branches as a way of distributing its products and that can be expensive coupled with other management expenses that come with it. Largely life insurance companies tend not to make underwriting profit in their first couple of years.
Ques: Is it because you took advantage of the Groupe Nduom brand that gave you a head?
Ans: In our case it is different because we did take advantage of we being a member of a large group and fortunately in the group there is a bank, a bank that is the biggest in terms of footprints with about 270 locations nationwide. We went into a banc assurance relationship and as a result of that we have managed to distribute our products through that partnership and essentially reducing our cost of distribution.
Even though we may not have numerous physical branch locations in the country, we can be found in all the locations of GN Bank across the country and as a result of that our cost of distribution for our first full year is much reduced. This certainly has fed into the underwriting profit.
We also believe that as a company we have had a good brand presence being associated with the Groupe Nduom. GN is a well-known brand with over 50 companies in the Groupe and that has helped.
The other interesting thing about our operations is that when it comes to group life, our first group life business is to provide group life and personal accident cover for all the group entities and as a result we have created quite a sizable group life portfolio and we are confident of growing from there. We also have quite a sizable credit life portfolio providing credit life for both the bank and our affiliate company, GGFC, as well. These have significantly contributed to our performance for 2016. We believe that we will build on this going forward. In our second full year our performance will be an improvement on the first full year.
Ques: How do you intend to take over the market?
Ans: GN Life intends to differentiate itself in the market. There are 23 life insurance companies including GN Life in the industry and we have to find a way of differentiating our brand in order to position GN Life for growth. This, we believe, we are doing quite well by leveraging on the Groupe brand.
GN Life seeks to be present in all the segments of the market, distributing our products to the high, middle and low income brackets. This, we have already started doing with the introduction of a product called the Fishermen’s Fund targeted at the fisherfolks along our coast in the country. We did launch this recently in Cape Coast in the Central Region and we have also launched this in other locations.
We are also in the process of coming up with a product called the Farmers Plan in conjunction with a company called BUSOL. This, we intend to roll out, to cover farmers in the Brong Ahafo, Ashanti and the Northern Regions in order to ensure that we are coming up with products that would cover as many people as possible, after all we in GN Life believe that EVERY LIFE MATTERS.
Ques: How do you find the insurance industry in Ghana?
The life insurance industry as it stands is made up of 23 life insurance companies and is supported by 3 reinsurance companies. The life industry has been growing in the last 6 to 7 year at about 12-13 percentage point above non life business. As we speak, the life insurance industry is contributing close to 47—48% of the total premiums generated in the market.
Clearly with this growth, there is an indication that in another 3 years, life insurance will be bigger than non life business and the signs are clear. One may ask, how did this happen? Certainly, since the passing of the new law—the Insurance ACT of 2006, ACT 724, which came with the separation of life business from general business, the issuing of specialised licenses and thus moving away from the composite era, life insurance then started to grow in leaps and bounds. As a result of the fact that the life companies had no choice but to ensure and justify their own existence, make their income in order to be able survive, since then we have seen life insurance grow and grow very significantly.
However, our market is among the top 5 or 6 companies controlling quiet a significant portion of market share. I have also realised that more than 40 per cent of the industry’s profit sits with one company which clearly is an indication of the potential that the industry holds. And that’s where I believe GN Life comes in.
We believe sincerely that there is a clear opportunity for GN Life to grow in leaps and bounds in order to get into that segment of the industry where we begin to be very significant in the area of market share and profits. I believe that the life insurance industry will continue to grow as the years come by. But, more importantly, one may wish to highlight on what the major ingredients will be to help with the growth.
Certainly, the issue of education is key, we need to continue to educate the general public on the importance of insurance and particularly life insurance. I believe that this is being handled by the stakeholders in the industry such as the Ghana Insurers Association, National Insurance Commission (NIC) our regulator, and other related bodies such as the Ghana Insurance College. With that kind of education we believe sincerely that in the next couple of years we will see the penetration of our industry grow from the just under 2% and inch up quiet significantly considering that in other parts of Africa, particularly in South Africa, where penetration is anything between 12-15% and I believe that is going to happen.
Que: Oftentimes, people consider life insurance as a fleecing company, how do you convince such people that that is a necessary product for everyone?
Ans: Life assurance is very important for our existence. As individuals and as a people, we are all exposed to two major risks, these risks are: the risk of dying too early or the risk of living too long. The risk of dying too early is obvious, you leave behind your dependants and that could spell doom for your dependants. The risk of living too long might not seem very clear but I can assure you that the risk of living too long can be more precarious. If you don’t plan very well and you live long then likelihood is that you may end up a destitute. These are two major risks that we all face. And these risks are always addressed by the purchase of an appropriate life insurance product. It is very important for managing the risks we face.
The other interesting thing about life insurance is that it is indeed a major source of long-term funds for purposes of development. As we collect premiums from individuals buying products and paying premiums for anything between 10- 20 years, these funds as they come in need to be invested in order that in the event that the prescribed peril occurs, the insurance company will be in a position to make good its promise of paying claims.
These funds need to be invested properly in order to be able to make good that promise. As a result of that it is a major source of long-term funds. In fact in the developed world, life assurance plays a key role in the real estate area, tying in their investment in terms of long-term assets to their long-term liabilities usually associated with life assurance. It is indeed an important aspect of our wellbeing as a people and therefore, we cannot in anyway underestimate the importance of life insurance.
Ques: Please tell us some products of GN Life and which one would you recommend that people should patronise immediately among the lot?
Ans: As regards, GN Life and our products, we indeed have a flagship product called the Passage Plan, which is essentially a funeral product. The reason why it is our flagship product is that as a society we indeed place premium on ensuring that we give our loved ones a befitting interment which normally comes with cost. Our normal practice in the past has been to expect contributions from the family.
But clearly extended family system is indeed breaking down and therefore, the need to have a more reliable alternative to ensure that this is achieved. One of the surest ways in achieving this is through the purchase of a funeral product. We do have one which I believe is doing well and we are in a process of reviewing the cover limits. Our current cover in terms of highest payout is 10,000 Ghana cedis and it gives room for extended family and therefore, the product is designed to provide cover for as many as 14 persons on the policy. The unique thing about our product is that we have added a hospitalisation benefit onto it which pays out daily benefit once you are hospitalised for a minimum of 3 days. This distinguishes our product from competition.
Ques: Where would GN Life be in the next five years?
I believe sincerely that GN Life in the next five years will be a market leader in all respects, and will be significant in terms of market share (between 15 to 18 per cent) and will be part of the top 5 life assurance companies in terms of profitability. Most importantly, it will be part of the top 3 companies with a huge brand presence.
Ques: What legacy do you want to leave behind?
My legacy in some years to come would be having helped build a very solid company with very strong fundamentals in terms of a portfolio focused on risk products and having proper structures to support the growth of the company and by that ensuring GN Life will grow in leaps and bounds and will be proud to have been part of a company such as this.
By Frank Owusu-Ofori