Insurers told to separate business operations
Posted Tuesday, February 19 2013 at 11:15
Enforcing Act. The initiative seeks to fulfill the Insurance Amendment Act 2011, which came into force on September 2012.
Insurance companies offering both life and non-life insurance business as a composite company – fused under the same management – have up to September 2014 to separate operations, according to the Insurance Regulatory Authority of Uganda.
This will be in fulfillment of the Insurance Amendment Act 2011, which came into force on September 2012, according to the regulatory authority.
Ms Mariam Nalunkuuma, the IRAU publicist told Prosper last week that the move sought to grow the life insurance sub-section, grow competences in life insurance as well as complying with the international core standards of the insurance the industry.
“Composite firms had put a lot of emphasis on non-life, which explains why it has grown that much compared to the life business. We also want the life segment of insurance to grow,” Ms Nalunkuuma said.
Life insurance covers aperson’s life where upon death, a sum of money is paid to a designated beneficiary or depending on the contract, terminal illness may also trigger payment.
Non-life insurance on the other hand covers risks outside life such as motor third party, fire, personal accident, engineering, worker man’s compensation, burglary and legal expenses among others.
Out of the 22 insurance players in the market, seven are composite; two offer only life insurance while the rest offer only non-life insurance.
In 2011, the non-life insurance segment accounted for 88 per cent of the Shs296.83 billion written premiums collected while life accounted for only 12 per cent.
Industry players say the separation will create specialisation and give companies more time to concentrate on core business which will in turn grow the sector.
Mr John Karionji, the Insurance Company of East Africa Uganda chief executive officer, said more companies are expected to invest in life insurance which will enhance market penetration, better trained personnel and increase product offerings.
Mr Anthony Githuka, the UAP general manager said the split will allow firms to focus on singular markets, something that will boost growth and innovation.
The separation means that the two lines of business also have to operate from separate premises, have a separate board of directors, staff and equipment among others.
Whereas some costs were shared under the composite arrangement, under the new arrangement, each company has to meet its own costs.
Mr Joseph Almeida, the Liberty Life managing director, however, said although it would strengthen the industry, it may force some companies that are not so strong in the life business to merge in order to get a bigger policy base.