Despite a modest uptake of bancassurance products since October last year, increased competition among commercial banks and a steady growth in new investments in the information and communication technology as well as the leisure and hospitality sectors might boost future demand, experts say.

Bancassurance products refer to insurance policies sold by commercial banks to their clients on behalf of insurance companies.

This is a strategic partnership meant to grow in the insurance industry by expanding the customer base, making distribution networks cheaper and running joint marketing campaigns.

Insurance Regulatory Authority of Uganda (IRAU) data put total insurance premiums collected from bancassurance channels at between Ush4 billion ($1.07 million) and Ush5 billion ($1.3 million) between October and December 2017.

The distribution of sales revenue among the participating banks and insurance firms is not yet available.

Commissions earned by banks from these products lie between 10-23 per cent of the value of each policy sold, based on terms agreed between different banks and insurance companies.

This roughly translates into minimum commission incomes of Ush400 million ($106,907) to banks during the last three months of 2017.

So far, 10 out of 24 Ugandan banks have acquired bancassurance business licences since the regulations were gazetted last July. Several other lenders have applied for these licences too, IRAU officials say.

Some of the banks that have obtained bancassurance licences are Stanbic Bank Uganda, Barclays Bank Uganda, NC Bank Uganda, Diamond Trust Bank Uganda and United Bank of Africa Uganda, a subsidiary of Nigeria’s United Bank of Africa.

Participating insurers include Sanlam Insurance Uganda, Jubilee Insurance Company, UAP Insurance Uganda, Insurance Company of East Africa Uganda and NIC Holdings.

Minimising risks

The modest uptake of bancassurance policies witnessed since last year is partly reflected in some banks’ sales data.

Statistics from Diamond Trust Bank Uganda, for instance, indicate that the lender sold 350 life insurance policies between November 2017 and April 2018, with monthly premiums ranging from Ush150,000 ($40) to Ush700,000 ($187).

The bank sold 100 general insurance policies during the same period, comprising motor accident covers, property insurance and workmen’s compensation.

“The projected impact of bancassurance business on Uganda’s insurance industry penetration rate against GDP is not yet clear but this measure is not sufficient in assessing real growth patterns in this industry.

“We are considering alternative benchmarks, like number of insurance policies sold per year and the effect of changes in consumer prices on people’s appetite for insurance. We expect significant growth in bancassurance-related premiums given more banks are coming on board,” said Protazio Sande, IRAU’s assistant director for market research and development.

“Total insurance premiums collected by insurers grossed Ush634 billion ($169 million) in 2016 while the overall industry penetration rate stood at 0.73 per cent.

Some experts are counting on new investments being undertaken in the ICT and leisure, plus hospitality sector, to drive future demand for insurance products as investors seek to secure new, high-value assets from damage or theft.

For example, telecommunications companies usually invest more than $50 million after every three years in new network infrastructure needed to absorb higher customer numbers, user traffic and also minimise risks of cyber attack.

In contrast, smaller technology firms are actively investing in new digital payments platforms, cloud computing servers and data storage centres that cost an average of $1 million to $5 million per unit.