Insurance in Uganda records 12pc growth

Segments like bonds, public liability, and personal accident insurance record growth.

A Bank of Uganda officer attends to clients at the BoU stand at the banking and insurance expo in Kampala. PHOTO FILE | NATION 

IN SUMMARY

  • Increased acquisition of agriculture, life, bonds, public liability and engineering insurance products contributed to the growth in gross premiums.
  • The slow growth in 2016 has been partly blamed on the election that year with its related uncertainties — ironic given that uncertainty should ordinarily be a boon for insurers.
  • Despite this growth, players in the industry still decry the fact that insurance penetration has remained below one per cent for more than 30 years

Uganda’s insurance industry registered a 12 per cent growth in the first half of 2017 compared with the same period in 2016.

Increased acquisition of agriculture, life, bonds, public liability and engineering insurance products contributed to the growth in gross premiums from Ush321 billion ($86.9 million) by June 2016, to Ush360 billion ($97.5 billion) in the first half of 2017.

This promises a much better year than 2016 when growth was just 3.6 per cent. The slow growth in 2016 has been partly blamed on the election that year with its related uncertainties — ironic given that uncertainty should ordinarily be a boon for insurers.

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Other factors were problems experienced by some of Uganda’s trading partners China and South Sudan, as well as a reduction in remittances from Ugandans living abroad.

But Deepak Pandey, the Uganda Insurance Association (UIA) chairman, said the industry is recovering. He nevertheless cited steep taxation as hampering quicker and stronger growth.

Products like engineering, which registered a 67 per cent reduction in 2016, saw a 22 per cent recovery. Other segments, like bonds, public liability, and personal accident insurance also grew faster than last year.

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Slow insurance penetration

Despite this growth, players in the industry still decry the fact that insurance penetration has remained below one per cent for more than 30 years.

To address this challenge, the government has come up with different regulatory mechanisms including amending the Financial Institutions Act, thus opening up opportunities such as bancassurance, where banks can act as insurance agents.

Kaddunabbi Lubega, the chief executive officer at the Insurance Regulatory Authority, while announcing the issuance of a license to the first commercial bank to provide bancassurance, said the government has come up with various policies to improve penetration.

Mr Lubega said the authority seeks to increase insurance penetration from the less than one per cent to at least 3 per cent within the next five years.

READ: Uganda traders to insure marine cargo from July

Fastest growing
Mr Lubega announced a week ago that Stanbic Bank had been licensed to provide bancassurance, a move that is expected to expand insurance opportunities for both players and clients.

“Banks already have higher foot traffic than insurance companies, so by introducing bancassurance, we expect more growth,” said Mr Pandey.

Other measures to increase insurance penetration include a 2014 directive by the regulator that forced composite companies to split their life and non-life operations.

Mr Pandey said this move is starting to pay off as life insurance has now become one of the fastest growing segments. In the first half of 2017, individual life was one of the fastest growing segments having registered a 40 per cent increase in gross premiums for the first half of 2017.

The life business is also the reason that Uganda’s insurance sector grew in 2016, as non-life registered a negative 3.1 per cent that year.

The government has since the 2016/17 financial year provided Ush5 billion ($1.4 million) as agriculture insurance subsidy. This led to the number of farmers taking up agriculture insurance to increase from 100 commercial farmers in February to the 26,892 now.

Information from the UIA shows that 98 per cent of the new farmers are smallholders.

UIA chief executive officer, Miriam Magala, said they expect that by the end of the year, 50,000 farmers will have been registered to receive agriculture insurance thanks to the government subsidy, which makes it possible for smallscale farmers to pay only 50 per cent of their premium.

For the 26,892 customers that were registered by June, the insurance industry has so far written premiums worth Ush1.5 billion ($406,439).
The expectation is that by the end of 2017, the premiums will have increased to Ush4 billion ($1.1 million).

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