Uganda’s financial sector regulators have agreed on regulations that will soon see bancassurance become operational, despite protests from insurers.

Regulators and commercial banks see bancassurance — the sale of insurance products by banks — as a way to increase insurance penetration.

Data compiled by the Insurance Regulatory Authority for the past 12 years shows penetration has been stuck at 0.88 per cent.

Insurance penetration in Uganda is among the lowest in the region, compared with Kenya’s 2.93 per cent, Tanzania’s 0.9 per cent and Rwanda’s two per cent. 

Insurance Regulatory Authority chief executive officer Kaddunabbi Ibrahim Lubega said bancassurance will address the low insurance penetration in the country by allowing insurers to tap into the banking sector’s network across the country.

“Bancassurance will provide revenue growth, channel diversification, offer quality customer care, quicker geographical reach and creation of brand equity,” said Mr Lubega.

Increase profitability

This move could see banks increase their profitability by enhancing their commission-based income, at a time when non-performing loans are quite high. As at June, non-performing loans stood at 8.3 per cent, the highest in the past seven years.

Banks will get between five and 20 per cent for each insurance product they sell. 

However, to start selling insurance, banks will be required to pay a non-refundable fee of Ush500,000 ($146) to Insurance Regulatory Authority for the first application, get a letter of no objection from the central bank and have a banking license from Bank of Uganda.

According to Mr Lubega, insurance in Uganda has in the past struggled to grow because of the country’s history, where citizens lost insurance money during the 1987 currency devaluation.

There have also been issues of customers being cheated. But, he said, the sector’s image is improving through public awareness campaigns. He added that the regulator has spent time developing solutions that can make insurance accessible to all Ugandans.