Perceptions about insurance industry

Despite the long existence of insurance in Uganda, the industry still has challenges with getting the public on board. Presently, insurance has only 0.73 per cent penetration in Uganda.

According to Mr Douglas Semakadde, the business development manager at Phoenix of Uganda Assurance Company Limited, their major customers are corporate organisations although, the Small and Medium Enterprise (SMEs) clients are more in number but mostly less valued in premiums. He said despite positive perception of clients on fold, lack of awareness especially among the uninsured public is still a challenge.

“With our customers, their perception is positive since they are already in the fold. With the ones approached, the struggle to get them informed still exists. But we are breaking barriers,” he says.

The fears
According to Ms Cynthia Nakowa, a risk assessor at Equity bank and former employee at UAP insurance company, people have a perception that the insurance companies do not pay claims which guarantees lack of trust from the claimants hence averting progress.

She also reveals that people in Uganda see no reason to partake in insuring themselves or their properties because of the low disposable income.

“The public members I have interacted with are of the view that insurance companies do not pay claims. But I believe if people do not have enough disposable income, they will never think about getting an insurance policy,” she says.
Reiterating Ms Nakowa’s statements is Ms Ann Muhangi, the managing director at Wholesome consult, saying it is sad that Ugandans do not take insurance important yet for business, it is rather paramount for growth and sustainability.

The business consultant says reluctance in investing in insurance for most SMEs is only an issue of poor planning, they only tend to the now and not future plans. The proprietors merely get money and start up a business without thought of risk control, which could prove detrimental to a business, a major difference with the larger corporations.

Ms Muhangi says Small and Medium Enterprises (SMEs) are scared and use excuses of inadequate funds which limit them from venturing into the insurance industry, a statement she dismisses, saying if someone can afford to start up a business, they can also get involved in insuring them because it is affordable.
Furthermore, she says people do not believe in insurance because they think it will be too tiresome to demand for claims after demise of property. They believe they will get lost in demanding, losing more time and money.

“People are scared of it yet it is the future. They do not believe in it because they have a feeling it will be tiresome. They also blame the small capital base which keeps them maintaining a short-term business plan and not the long-term, they say, if I don’t have enough money for my business, where will I get the one for insurance?” she says.

Furthermore, owing to the future direction of business, in particular equity financing, she says insurance is the new future because it gives an investor confidence and buffer to recognise that even in calamities or any unavoidable circumstances, his or her investment could be compensated and reinstated.

Ms Muhangi says in future, it could be a requirement from investors before investing huge sums of money in a business.
That is why she advises SMEs to invest in insurance, lest they face losses when danger strikes.
However, Ms Nakowa believes that unless insurance companies introduce products for low-income earners, who make up a big portion of the country, insurance will maintain the challenge of low penetration in Uganda.

Contrary to Ms Nakowa, the chief executive officer of Insurance Regulatory Authority, Mr Alhaji Ibrahim Lubega Kaddunnabbi, says insurance should not be a balance remained expense. He said Ugandans should move from that mindset and prioritise insurance because it safeguards the property they buy with alot of money and they should value it too by insuring and protecting it.

Why insure?

Mr Parag Shah, the chief finance officer at Madhvani Group Limited, says the company insures with East African underwriters because it is inevitable to have risks. The insurance they pay for is a guarantee of compensation in case of any risks. The Group has vast policies such as Marine insurance, cash insurance, fidelity insurance, buildings and medical insurance, among others.
He said: “We take all opportunity to mitigate risk of uncertainty which is part of any business.”

Mr Patrick Lubwama, the marketing manager at Hass Petroleum, says they insure their company with UAP to transfer risk to the risk takers (insurance company).