Growth of insurance numbers continues to be a major hurdle

Low growth. Standing at 0.6 per cent, Uganda has the lowest rate of insurance penetration in East Africa.

Uganda’s insurance sector continues to struggle in terms of growing its numbers and penetration. This has been worsened by numerous economic volatilities that have drained people’s income thus becoming conscious of their expenditure options.

Although the industry had been anticipated to grow in the range of 20 or 30 per cent this year, Mr Ibrahim Kaddunabbi, the Insurance Regulatory Authority (IRA) chief executive officer, told Prosper recently that growth would be lower.
This view is shared by all players in the insurance industry, who say business was slow throughout 2012.

In 2011, the industry’s premium written grew by 23.69 per cent.
IRA undertook numerous reforms in 2011 including spearheading the passing of the Insurance Amendment Act 2011, raising insurers’ minimum paid-up capital requirements and setting strict timelines within which claims must be paid.

The volatile economic environment, however, has not provided a favourable ground upon which this could happen.
Mr David Tumuhaise, the Uganda Insurers Association technical manager, said 2012 started on a bad note as inflation was still in double digits thus suffocating the industry’s growth.

“The performance of the insurance sector highly depends on the performance of the economy. You cannot expect someone to buy insurance yet they have to eat. Even if there is growth, it cannot measure up to levels it was prior to the volatilities,” Mr Tumuhaise says.

Mr Tumuhaise’s view is shared by Mr John Karionji, the Insurance Company of East Africa, Uganda chief executive officer, Mr Deepak Pandey, Jubilee insurance chief executive officer and Mr Newton Jazire, Lion Assurance managing director.
Although the economy is yet to fully recover from the after-effects of the tough macroeconomic environment, players are hopeful that 2013 will be better now that inflation seems to be under wraps.
Mr Kaddunabbi says IRA will dedicate 2013 to claims settlement to ensure that all players comply with set deadlines to boost the reputation of the industry.

“2012 was dedicated towards premium payment to insurers and we registered increased compliance and now we want to focus on claim settlement in 2013 to ensure that insurers respect the insured’s claims payment,” Mr Kaddunabbi said.

As part of its plan to streamline the insurance industry and better service provision, IRA in 2011 set new timelines within which all claims should be paid.

For instance, insurance firms are required to pay claims of up to Shs10 million within 10 working days after receipt of discharge voucher.
Claims of between Shs10 and Shs50 million must be settled within 15 working days while those above Shs50 million have to be paid within 20 working days after receipt of discharge voucher or upon receipt of cash call payment from reinsurers, whichever occurs first.
Mr Kaddunabbi says for any player failing to pay claims within the agreed timelines, they must have convincing reasons for contravening guidelines.

In the event of failure to pay
A Policy Holders’ Fund was, however, established to help settle clients’ claims in case individual insurance companies fail to pay.
In a bid to save the industry millions of shillings that fly out of the country for reinsurance services overseas , Mr Kaddunabbi says the NationalRe, the proposed local insurer is expected to come into place early next year.

The industry loses about 40 per cent of the premiums underwritten to foreign reinsurance firms; something Mr Kaddunabi says is not healthy for the development of the local industry.

“We have discussed with players in an effort to make UgandaRe become the national reinsurance company and we are hopeful that it will be licensed in the first quarter of 2013,” Mr Kaddunabbi said.
Data from IRA indicates that the amount of money that local insurers pay in reinsuring premiums to foreign reinsurance firms has been growing steadily from Shs40 billion in 2008 to Shs115.99 billion, in 2011.

The establishment of a local reinsurer is long overdue as it was expected to come before the end of 2011. There are also plans to re-examine the motor third party insurance premium limits, which Mr Kaddunabbi says is still abnormally low.

fkulabako@ug.nationmedia.com