Unhealthy competition costs insurance growth – Karionji

The insurance industry in Uganda has evolved over time. But penetration is still low compared to other markets in the region. As one of the corporate leaders who has been at the game for more than a decade, what can you say are the highlights of the sector during this period?
I joined the Uganda insurance market in 2006 coming in as the assistant general manager in charge of business development. The industry has gone through several developments over the years. Perhaps most outstanding is the transformation of what was then the Uganda Insurance Commission (a department in the ministry of Finance) to the Insurance Regulatory Authority - a fully-fledged parastatal. In 2014, all composite companies were split into general insurance companies and life insurance companies starting an era of insurance specialisation.
Through the years, I have also witnessed tremendous development of local capacity. We currently have majority of the companies employing Ugandans who are qualified insurance professionals as opposed to back then when ACII holders were mainly expatriates. Credit must go to the Insurance Institute of Uganda for this achievement.
Competition has stiffened with many new entrants into the market probably following the smell of oil and gas. We now have 29 insurance companies and 35 brokers compared to 19 and 23 respectively in 2006.
I cannot forget to mention that additionally, premium growth has been phenomenal over those 10 years.

What should be done to drive insurance penetration which stands at less than 1 per cent of the Gross Domestic Product (GDP) in Uganda?
The impression created by measuring penetration against GDP is that we are either not growing or declining. This is not correct. Total industry premiums have grown from Shs102b in 2006 to Shs612b in 2016.
But the GDP has also been growing. Therefore, when the denominator and the numerator are growing in the same direction, the difference will only be apparent if the proportions are materially different taking into account also the actual values.
The best measure of performance should be real premium growth (factoring in inflation) and the actual number of policies issued.

Technology is becoming a huge determinant of growth in many sectors including insurance. How has ICEA leveraged on this to grow their business in Uganda and the region?
It is true that no company can expect to survive for long in this day and era without leveraging technology. At ICEA, we have been at the forefront of coming with cutting edge technology to serve our clientele. We have an in-house team of IT professionals who are constantly working to keep our processes up to date. In addition, they have developed software that enables real time interaction with the clients because we believe that the next frontier is in e-commerce. As a group, we have received many accolades for achievements in this front.
One of the biggest problems with insurance is the perception that companies do not pay claims; and when they do, it is after a protracted struggle with them. What should be done to change this perception?
This is not an easy problem to solve overnight because the level of literacy among the populace is still low and insurance is based on complex laws and practices. Even in developed countries where people are highly literate, these suspicions do exist. Efforts to sensitise the people on how to proceed whenever they have a claim are in progress both by individual companies and by the regulator. The industry should continue to embraceing practices that build trust with the public to reduce suspicion.

Insurance fraud is a growing problem and it is estimated that insurance companies lose billions of Shillings annually to fraudsters. How are the players containing this?
This vice is as old as the insurance industry itself and is not about to disappear yet; not as long as there are criminals living amongst us. Criminals are always a step ahead of law enforcement, devising new ways of carrying out their crimes when the old ones are discovered. The industry can only stay alert and ensure they do not fall prey to fraud. Perhaps this also contributes to the accusation that insurers only pay claims after a protracted tussle. Not quite. Insurers want to be sure they are paying genuine claims. The claimants can help the process by providing all information in a timely and transparent manner.

Insurance companies went through a demerger process that saw the separation of general, life and asset management business. How has this impacted on growth of the sector?
As much as the process was painful, the long- term benefits for the market are immeasurable. Companies are now better capitalised which increases their stability. At the same time specialising in either general or life insurance contributes to more focused product development. There is also better application of revenues as opposed to previously when revenues from one stream would be utilised to prop up a non-performing stream thus masking the real health of a company.

Are there specific policy changes you would like to see happen in the insurance sector?
Yes indeed. I still believe charging VAT on premiums especially for individual policies was not called for and has really hurt the growth of insurance. The government should review this action and look at the bigger picture of encouraging premium growth and hence, taxing profits of insurance companies. VAT on policies issued to corporates is in order since they can treat it as input tax.
The current policy of unrestricted entry into the market has led to too many players in a very tiny market. Twenty nine players are far too many. This has led to very stiff and unhealthy competition and ultimately, the loser can only be all the players. The departure of AIG last year is a red flag that we should not ignore.

You have been in this business for close to a dozen years. What direction would you like to see ICEA and insurance take in the next five years?
As I have indicated above, stiff and unhealthy competition is slowly creeping into our market place. This has led to dropping standards of insurance practice and ethics. ICEA and indeed all the market players whether insurers, brokers, agents or loss assessors should endeavour to take back the industry to professionalism and upholding time honoured international best practices and standards.

Should ICEA customers be worried about the transition?
No. My replacement is also a seasoned professional insurer with an outstanding track record in customer service delivery. I believe he will ably take the business through the next growth phase.