Insurance companies that flout the industry regulations and guidelines will risk losing their operating licenses as the regulator moves to enforce strict compliance norms.
Speaking at a meeting to share the baseline survey findings of the industry with insurance companies’ chief executive officers yesterday, Insurance Regulatory Authority (IRA) chief executive officer Ibrahim Kaddunabbi Lubega said the move is meant to streamline service delivery and boost public confidence in the sector.
The survey findings showed that despite instituting a number of reforms, the industry continues to grapple with numerous challenges including price under-cutting - charging premium rates that are below the approved minimum rates, delayed claims payment or nonpayment and poor service delivery, among others, due to non-compliance.
Although some insurance companies undercut premium rates to gain an edge over competition, the act is said to be distortionary it causes revenue loss.
Withdrawing operating licenses for non-compliant players will be among the many measures IRA is undertaking to solve the non-compliance challenges, which are also said to be partly responsible for low insurance penetration, currently at 0.6 per cent.
“We have experienced some improvement as far as price undercutting is concerned but we want it eliminated completely because it affects both the insurance companies and the industry in general. Price undercutting results into companies’ inability to pay claims which taints the industry’s image,” Mr Kaddunabbi said.
Although he declined to name the firms which have been penalised so far, Mr Kaddunabbi said some have either been fined Shs10 million for each policy where undercutting has been found and they now risk losing their licenses if they don’t comply.
Mr Protazio Sande, the Assistant Director Market Research and Development, however, noted that the insurance sector has huge potential, requiring that players introduce innovative products that appeal to various people in the market in addition to using technological platforms to deliver insurance services.