FINC351: INTRODUCTION TO INSURANCE

CHALLENGES FACING LIFE INSURANCE

Life Insurance can be defined as a legally binding contract between an insurance policy holder and an
insurance company, where the insurer promises to pay a sum of money to beneficiaries stated in the
contract in exchange for a set premium, upon the death of an insured person or after a set period.

Life insurance provides financial support to preserve your way of life, or that of your family, in the event
of an accident, serious illness or even death.

Life insurance in a way also gives you peace of mind that your family will be financially protected, death
is unavoidable. In the event of your absence, your family will not face financial difficulties.

As does everything, life insurance has challenges. Some challenges facing the life insurance are

The first challenge is the complexity of Life Insurance contracts. Life insurance contracts are
sometimes too complicated for someone with no insurance knowledge to understand. I think this is a
challenge, premiums to be paid, policy term a policy holder will be covered for, coverage amount,
exclusions if added may eventually make the contract too complex it may be worth nothing. For instance,
some policies may exclude coverage for death caused by performing high-risk activities when maybe the
policyholder was not prompted when he agreed to this contract due to his illiteracy in insurance industry.
Insurance companies should make sure every detail of a contract is understood by the policy holder
before he endorses to prevent a dispute if the insurer should breach the contract. This initiative will help
both parties in the long term.

The next challenge is the Delays in Claim process. Delay in claim process simply refers to certain
scenarios where a combination of factors causes payment of claim to take longer than expected. Because
there are several phases a claim must naturally go through to be paid or declined. These delays could be
caused by the insured, insurer or a third party. Since the Ghanaian Insurance industry is not as advanced
in the utilization of technology as in the western world, handling all these processes there is usually
holdups in between phases. In the USA for example, insurance firms receive real time footage of the day-
to-day activities of the insured, once there is a loss the first step in settlement of claims; The notice of loss
must be given to the Insurance company has already been received ahead of time by the insurer and is
already making ground on the claim process whereas in Ghana, it is not as quick to know this. This
naturally causes delays in claim processing. Insurance Companies must adopt effective measures to avoid
or reduce such delays to ensure a satisfactory claim payment process.

Also, the High Cost of Premiums in Life insurance proves to be a challenge. The high cost of
premiums remains a crucial concern for individuals and policymakers alike. Premiums are determined by
your medical profile, family medical history, age. These premiums are most affordable during your young
age however these are the times in your life when you don’t earn a considerably high income. However,
as you get older and income level increases, insurance companies are inclined to charge a higher premium
as your risks increase too. This proves to be a turnoff for most Ghanaians to enter into a life insurance
contract. Because if you must pay high premiums, it would be better to invest in other long-term ventures.
Making premiums affordable regardless of a person’s condition would make life insurance attractive to
the public.