MODELLING OF EDUCATIONAL POLICY TO SUSTAIN RESERVES - A case study of State Insurance Company.

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 Postgraduate Material  |  Attribute: 58 pages  |  Chapters: 1-5
Format: MS Word  |  Price: GH50  |  Delivery: Within 30Mins.
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