ABSTRACT
The Insurance Industry in Ghana has seen setbacks though situations
after 1986 stabilized and many Insurance companies came into being. The entry
into the market of many rms led to sti competition which resulted in rms
engaging in unethical malpractices. The rms in their operations registered poor
performance over the years. The main objective of the study was to model one
year educa-tional plan for State Insurance Company (SIC) clients by estimating
a reasonable premium to the full year for which the company can also earn pro t
after selling the product. Among the insurance companies in the country,
SIC-Life insurance Company was purposively selected as a sample to represent
Ghana’s Insurance sector. The study took the form of longitudinal and
documentary review that included among others, nancial, annual and other
corporate documents. The study revealed that SIC-Life Insurance Company sells
four life products under Universal Life policies namely; Family Security Plan,
Flexi-Child Education Pol-icy, Ultimate Life Plan and Education Plan. Annual premiums
estimated for the policy at 6% interest rate using principles of equivalence
indicated the company can keep enough reserves as compare with their current
operations. Pro t testing analysis was performed to arrive at 1.38% pro t
margin of the education plan. The study revealed that Insurance companies
manage risk through a number of ways including re-insurance and co-insurance.
It is recommended that Insur-ance companies should conform to the ethical
conduct and statutory regulations and procedures if they are to succeed,
including optimal premium ratings, sound investment policies and risk
management processes.
CHAPTER 1
Introduction
The reserve of any company gives the o ce a measure of the
minimum funds it needs to hold at any point during the term of a contract. The
process of calculating a reserve is called the valuation of the policy.
A reserve is money set aside by the insurer, for the
policyholder to pay policy-holders bene ts and where appropriate, future
expenses.
Reserves can be estimated by means of prospective approach
which is looking into the future and discounting to the present or
retrospective, that is looking at the past and accumulating to the present.
Premium is an amount of money paid by policyholder to insurer
for a policy within a given period of time. Premium can be paid daily, monthly,
yearly etc.
The child education policy is a life insurance product
specially designed as a savings tool to provide an amount of money when the
child reaches the age for entry into college (18 years and above). The funds
can be used to pay for the child’s higher education expenses.
Under this policy, the child is the life assured, while the
parent/legal guardian is the policy owner. An adult life can also purchase
educational policy for himself or herself.
1.1 Background of
the Study
Insurance practice is said to date back to the period when
the Phoenician traders plying the Mediterranean Sea 3000 years ago, had a
system of insuring against loss during their maritime adventure. Marine
insurance is therefore rst class of insurance business ever transacted. It was
followed by re insurance, which came after the great re of London in 1966.
In 1950, life insurance was introduced and the industrial
revolution of the 18th century gave birth to the accident insurance, (Turner, 1984).
According to National Insurance Commission (NIC), the market
for insurance in Ghana is growing and changing rapidly. The market o ers great
opportunities for existing ones as well as new entrance since Ghana has
relatively small number of insurance companies as compared to other countries.
The expected growth po-tential is attributed to its highly untapped market,
rising awareness level, health consciousness and initiative taken by the
government and the industries govern-ing body.
Prior to the enactment of the insurance law in 2006, only two
companies Gemini Life Insurance and Ghana Life insurance were operating in the
country. Among other enactments, the law barred players in the industry from
operating com-posite insurance companies. Since most of the insurers operated
very large life insurance business unit as part of their portfolio, they needed
to comply with the law by separating the life unit from non-life unit.
According to National Insurance Commission’s Annual report
(2005), the indus-try as at 31st December, 2005, was made up of eighteen (18)
registered rms with two (2) re-insurance companies and thirty two (32)
brokerage rms. The total number of licensed sales agents as at then was four
thousand three hundred (4300). Between 1998 and 2002, non-life insurance
premium income accounted for 86.68% of gross premium income with life and
health accounting for only 14.2%. Motor accident insurance dominated in the
non-life (General Insurance) business unit and life insurance accounting for
41.6% and 16.4% respectively probably as a result of the enforcement of the
legal requirement for vehicle owners to ensure their vehicles by the police.
It is becoming increasingly pertinent for the insurance
industries to be creative, innovative and proactive in engineering products
that will attract the interest of the public.
Consequently, after years of symbiotic relations, two
business units, non-life and life, parted ways leading to the biggest corporate
restructuring ever in Ghana’s insurance industry.
The nancial stability and strength of an insurance company
should be a major consideration when buying an insurance contract. An insurance
premium paid currently provides coverage for losses that might arise many years
into the future. For that reason, the viability of the insurance carrier is
very important. In recent years, a number of insurance companies have become
insolvent; leaving their policy holders, with no coverage or coverage only from
a government backed insurance pool or other arrangement with less attractive
payouts for losses.
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===================================================================Item Type: Ghanaian Topic | Size: 58 pages | Chapters: 1-5
Format: MS Word | Delivery: Within 30Mins.
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