Most Ghanaians dread risks. How do i know? Because, we do not go sky-diving or roller-skating. Oh!, a better reason: most Ghanaians out to be risk-averse because a better proportion of us don't stake lotto! We fear the consequences of the loss of a relative, a damage to(and/or loss of) property,etc. Unfortunately for us, our insurance firms (SIC especially) which are required to protect us against these risks are not living up to expectation: Despite the gazillion number of trips my mum made to SIC, she did not even receive a pesewa,as compensation, to at least reduce her transportation cost accumulated from her persistent visits to SIC branch.
My mother's unfortunate experience has compelled me to be very interested in how things work in insurance market. As a child, i, like most other Ghanaians, blamed and hated the corrupt management of SIC, for their consistent deviations from their promise to deliver the customer when needed(in my case, repair my mum's car). Growing up as an Economist,however, I have deduced that, the failure of Ghanaian insurance firms is more likely to be as a result of a non-sophisticated insurance team and an informationally-sick environment, than just the pocketing of company's money. If lack of corruption was the key to success, Provident insurance would not have failed as it has! (provident as a private firm would sternly be checked for any corruptive hands, trust me).
Lack of sophistication: When i called Geico(a US-based insurance firm) for an insurance quote, they grilled me like a criminal for pertinent information (age, GPA, sex) that would enable them estimate my probability of an accident on the road. This makes me wonder why no taxi-driver in Ghana is asked a single "quosa"(question) by SIC before he gets insured.
Informationally-sick: Ghana's economic environment is suffering from a fatal version of an information malady called Information Assymetry. Information assymetry basically makes it hard for insurance companies to distinguish risky drivers (like Ashifi GOGO) from non-risky ones like myself. Consequently, they charge everybody the same premium! Wouldn't it suc that, despite my carefulness on the street, I pay the same premium as Gogo who does like 100mile per hour on a 55 per hour speed limit road. Well, such a pricing strategy would result in all non-risky types not buying insurance and all risky types cramming for it.(Good luck to an insurance company patronized by only Ashifi Gogos.) One can therefore easily verify Gyasi's equality:
INSURANCE + INFORMATION ASSYMETRY (+or-)Corruption = FAILURE like SIC
To better understand this equality, read the noble prize winning paper, "The Lemons Market" by George Akerlof, OR
send me an email so I copy you my more reader-friendly and equally-enlightening article, "Information Asymmetry:Reason for the Failing Insurance Market".