Ghana’s insurance industry has seen a lot of vibrancy since 2006 when its legal regime changed to compel all composite insurance companies to separate their life and non-life operations into different companies.

Since then, many players in the industry, particularly those operating in the life category, have developed and marketed all kinds of products and services to promote life insurance to Ghanaians, an aspect of insurance which until the new law became operational, was the mainstay of only a few insurance companies.

Over the years, the main focus of the majority of insurance companies in Ghana has been non-life or general business, particularly motor insurance, and for good reason. Motor insurance was and still is a dominant part of the industry because, unlike other types of insurance such as property and fire which the law makes mandatory, motor insurance appears to be the one which the police can easily enforce.

Consequently, motorists in Ghana are compelled to buy insurance to cover their vehicles and third parties in order to avoid arrest and prosecution by the police, who are regularly on the streets to, among other things, ensure that insurance stickers displayed on vehicle windscreens are up-to-date.

With the passing of Ghana’s new pension law and its subsequent implementation in January 2010, hopes in the insurance industry have been raised as many life insurance companies are hoping to receive and trade with the portion of workers’ contribution earmarked for distribution to private fund managers who will be licensed to operate in the second-tier of the new pension scheme.

Previously, all workers’ contributions went to the state pension fund manager, Social Security and National Insurance Trust, SSNIT.

But under the new three-tier pension scheme, funds accumulated from mandatory workers’ contributions will be disseminated with one part staying with SSNIT (first-tier) and the remaining part going to private fund managers (second-tier). And there is yet a voluntary third- tier scheme largely made up of provident funds and personal pension schemes to supplement the retirement incomes of workers.

One of the companies which are waiting anxiously to play a significant role in the second and third-tiers of the new pension industry is Provident Life Assurance.

“Any pensions law, first and foremost brings to the fore the need to save for the future. So that is an advantage for insurance companies. And the tax benefits are interesting enough for people to want to be part of the new pension scheme,” said Wilson Tei, Managing Director of Provident Life Assurance in an interview with GB&F.

Provident Life Assurance was heaved off Provident Insurance as a separate company in February 2006 in keeping with the dictates of the new insurance law. The company is managed by a highly knowledgeable and experience team under the leadership of Mr. Tei who himself has over 36 years of experience in the industry, 28 of which has been in a managerial capacity.

“Any pensions law, first and foremost brings to the fore the need to save for the future. So that is an advantage for insurance companies. And the tax benefits are interesting enough for people to want to be part of the new pension scheme,” said Wilson Tei, Managing Director of Provident Life Assurance in an interview with GB&F.

His long years in the industry span the headship of the group’s life insurance administration at SIC between 1977 and 1980. In 1978, he was seconded on a technical exchange programme to the Zambia State Insurance Corporation Life and Pensions Division. He established and managed the Commercial and General Insurance Company’s Life Insurance Department in 1980 and, in 1984, he was contracted by the Liberian government on the recommendation of Swiss Re to prepare life administrative documentation, a management control manual and the set-up procedures for the Liberian National Insurance Corporation.

Mr. Tei was invited by the government of Ghana to serve on the committee that drafted the Long-Term Savings Act (LTSA) between 2002 and 2004. In 2006, he was invited again by the government to serve on the technical committee to review the LTSA, 2004.

Counting on the many years of industry experience of its team, Provident Life Assurance has set for itself a vision to become the insurer of choice in the Ghanaian life insurance market. And the company is poised to make the most out of the opportunities the new pension law offers.

However, under the new pension law the emphasis for insurance companies is on the third-tier which is voluntary and mainly targeted at workers in the informal sector. This seems to be a drawback to the easy flow of mandatory workers’ contribution the company was hoping to receive and manage under the second-tier of the new pension scheme.

Besides being denied guaranteed automatic access to the mandatory contributions of workers, playing in the third-tier pension scheme comes with another snag. Many workers in the informal sector are self-employed and usually do not pay personal income tax. As a result, the tax breaks (personal income tax breaks) the new pension law offers appear misplaced. “ So therefore, the carrot which is the tax break is not flavoured enough,” said Mr. Tei.
This leaves Provident Life Assurance in a situation where it has to compete with other fund managers for a share of the mandatory workers’ contribution under the second-tier, the only division of the new pension scheme which is yet to be operational because Parliament is yet to set the modalities for it. Meantime, the Bank of Ghana is holding in trust, the portion of the mandatory workers’ contributions originally planned for dissemination to competing fund managers under the second-tier.

To prove it is ready to compete in the second-tier, Provident Life Assurance has already rolled out two products to address the retirement needs of Ghanaian workers: the Special Investment Plan and the End of Service Benefit.

The Special Investment Plan, for example, offers individuals the opportunity to set up a retirement fund which is not only inflation friendly but offers life assurance protection as well. This private pension scheme cushions the policyholder financially by providing the person with cash payment upon retirement. It also guarantees the client and the family total protection of life insurance so that in the event of death of the policyholder, the person’s estate will receive a guaranteed life sum.

At the start of the contract, the client determines how much money he can conveniently contribute monthly, that is whether 5 or 10% of monthly salary.

This contribution will purchase a correspondent death benefit (sum assured) of several multiples of the monthly contribution. Each monthly contribution is allocated into a high-interest yielding account and the funds in this account are invested in bonds, shares, government paper, mutual funds among other instruments, which eventually hedges against inflation. At the end of each year, the yield on the total fund is allocated to each member’s account on a compound interest basis.

Provident Life’s End of Service Benefit is designed to address the need for retirement planning to ensure a comfortable lifestyle in old age. The company holds the view that every individual today has to contemplate the thought of living for a good 25 to 30 years post-retirement, and should seriously worry about where the resources to finance such a lifespan will come from. Coupled with a breakdown of the joint family system and increasing levels of urbanisation, the possibility of running out of income, post-retirement, has become a serious threat.

The objective of Provident Life’s End of Service Benefit is to provide members of the scheme with adequate regular monthly income at retirement and to ensure that members who unfortunately die in-service or are disabled have their dependants adequately provided for.

As the industry eagerly waits for the country’s lawmakers to set the parameters for players in the second-tier to start accessing the huge reservoir of funds now sitting with Bank of Ghana, Provident Life Assurance, looks set to drive the soon-to-begin stiff competition for long-term funds and assure workers of a retirement that will be dignifying.

The Provident team