The insurance industry in Uganda has stagnated in growth with penetration staying at below 1 per cent for the last 10 years. This is below the global emerging markets average of 2.7 per cent.
Insurance penetration is a measure of the premiums under written against the Gross Domestic Product. The Insurance industry in Uganda recorded a drop in the insurance penetration from 0.76 in 2015 to 0.73 in 2016 according to the Insurance Regulatory Authority (IRA) report released in May.
The low levels of penetration in Uganda have been linked to low levels of sensitisation, the perceived high cost of insurance, the impression that insurers do not pay claims, low levels of disposable income and the lack of tailored products.
In 2012, IRA in a bid to streamline the insurance service separated life insurance companies from health insurance companies. As of 2017, the IRA licensed 29 insurance companies (20 non-life or general insurance companies and nine life companies), six Health Membership Organisations (HMO’s), 35 insurance brokers and 21 loss assessors.
Mr J.W. Kiwanuka, the managing director, Statewide Insurance Company Ltd (SWICO), says: “Today, the world has become a global village and we are now talking of regional and International Corporation. Even if a company may have ‘indigenous’ roots, the challenges of maintaining the indigenous identity may be very difficult to sustain.”
He says more Ugandan firms have joined the industry over the years including some brokerage firms. But today’s business approach is different from the days when SWICO first started the business.
“SWICO’s history is unique. At the time we started the business, the political climate was rather turbulent and as such, the economy was not growing at the desired rate. Only four companies - National Insurance Corporation, East Africa General Insurance, Uganda American Insurance Co. and United Assurance which at the time was underwriting life assurance, were operational and many others had closed shop earlier during President Idi Amin’s days due to the expulsion of Asians and other foreigners. Thus this situation culminated into the formation of SWICO providing an alternative insurance option which Ugandans would identify with and whose owners were known to them locally. With this background, you will note that the history that brought SWICO into being no longer prevails today.
Mr Kiwanuka says the business approach today has changed. The market (consumers) and the regulator do not make a distinction between indigenous or foreign firms since they all operate under the same regulations.
He says: “We are now in a very competitive world and whoever comes up with the best product and customer service carries the day.”
Enough cake for all
Experts in the industry believe there are many opportunities for all insurance players especially the local ones to grow.
Mr Saul Seremba, the chief executive officer of the Insurance Institute of Uganda, an insurance training school that was started in 1964, says the low insurance penetration is an opportunity for the local companies to take advantage of.
According to the Africa Insurance Barometer report for 2017, new product developments in life insurance, medical care, agriculture or micro-insurance, as well as a growing middle class, may help close the gap.
However, given their need for specialist risk management capabilities and high quality security, large and complex risks are still ceded to foreign insurance markets which are already developed, causing a lot of premiums flight out of the markets.
According to Ms Miriam Magala, the chief executive of the Uganda Insurers Association (UIA), with the UIA projected industrial growth as well as the opportunities that the opening up of the East African Community, there are ample opportunities for local insurance companies to actively participate in this industry.
“The Insurance Act 2017 will bring a move from Compliance Based Supervision to Risk Based Supervision. This, coupled with the developments in oil and gas and financial services, is expected to attract more investment into the Ugandan market not only in the form of mergers and acquisitions, but also through insurance consortiums that create capacity to underwrite specialist and very large risks,” she says.
In addition to this, the industry is firmly regulated by IRA of Uganda who through the newly enacted Insurance Act 2017 is ensuring a stable environment in which both local and international companies can equitably thrive.
This situation has, in turn, strengthened the appeal for investment in insurance sector as evidenced by the fact that we have grown from less than seven companies in 1962 to 31 insurance companies today.
This is a good time for local investors looking to enter the insurance industry; in the new environment, competition will drive innovation.