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Market structure, efficiency and profitability of insurance companies in Ghana

Abdul Latif Alhassan (University of Ghana Business School, University of Ghana, Accra, Ghana)
George Kojo Addisson (STARLIFE Insurance Company, Accra, Ghana)
Michael E. Asamoah (Department of Finance, University of Ghana Business School, University of Ghana, Accra, Ghana)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 21 September 2015




The purpose of this paper is to examine the impact of the regulatory-driven market structure on firm pricing behaviour by testing the structure-conduct-performance (S-C-P) hypothesis for both life and non-life insurance markets in Ghana.


Using a panel data on 14 life and 22 non-life insurers from 2007 to 2011, the authors employed the Herfindahl Hirschman Index and concentration ratio as proxies for the S-C-P hypothesis while efficiency scores were estimated using the data envelopment analysis technique to proxy for the efficient structure (ES) hypothesis. The dependent variable, profitability was measured as return on assets while controlling for size, underwriting risk, leverage, GDP growth rate and inflation. The models were estimated using the panel corrected standard errors of Beck and Katz (1995) and random effects estimations.


The results from the empirical estimation provide ample evidence in support for ES hypothesis for both life and non-life insurance markets. While conflicting results was found for SCP hypothesis in the non-life insurance market, it was rejected in the life insurance market. The findings also point to an increasing level of competition in both life and non-life insurance industry in Ghana though they still remain concentrated with the life insurance sector having high levels of efficiency compared to the non-life sector.

Practical implications

The findings of the study will enhance the understanding of firm behaviour in the new markets created to shape regulatory and competition policies of the regulator to promote consumer welfare while ensuring a stable industry to enhance its role in economic development.


This is the first study to test the market power and efficient hypotheses on the insurance industry in Ghana. To the best of the author’s knowledge, this study is the first to examine the determinants of profitability in the non-life insurance market.



The authors are grateful to the Editor and Area Editor Professor Ronald Schramm for their comments. Constructive comments from two anonymous reviewers which greatly improved an earlier draft of the paper is appreciate. The authors also appreciated the help of Cosmos Owusu of the National Insurance Commission in providing us with the data. The paper was prepared while the first/corresponding author was a Teaching Assistant at the Department of Finance, University of Ghana Business School. An earlier draft of the paper was presented at the 1st University of Ghana Business School Conference on Business and Development, April 8-9, 2013, Accra, Ghana.


Alhassan, A.L., Addisson, G.K. and Asamoah, M.E. (2015), "Market structure, efficiency and profitability of insurance companies in Ghana", International Journal of Emerging Markets, Vol. 10 No. 4, pp. 648-669.



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Copyright © 2015, Emerald Group Publishing Limited

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