Insurance: A strategic partner for national growth and stability

The subject of insurance and risk is normally itchy and ill-conceived by many the world over. A lot of people believe that insurance firms make lots of money without any form of accountability. This is far from the truth.

Insurers are accountable to their clients and or the Insurance Brokers on behalf of many clients through a delivered first class service.

Furthermore, insurers are regulated by law to ensure that certain financial and fundamental standards are maintained and that they keep the promise made to their esteemed clients by settlement of genuine claims.

In Uganda, for example, insurers paid about Shs250b worth of claims for the financial year ended 2016. This was about 45 per cent of the premiums underwritten in the financial year 2016. The claims were settled despite the rising fraud levels, including cyber-crime.

The maxim of insurance is premised on the law of large numbers. Not all clients who take out insurance are likely to suffer losses. The ‘insurance pool’ through collection of the many premiums from clients plus the investment of the same does help to settle the claims.

Without the law of large numbers, it would not be possible to insure the few clients, as the shareholders capital alone, would not be sufficient to cover the losses that would occur.

As some of the risks are not within the capital base of the insurer, they buy reinsurance protection from other professional firms to enable them cover the risks. Hence when single very large losses or catastrophes occur, insurers seek recovery from reinsurance firms whom they had shared your initial premium(s).
Further, you only take out insurance as a form of protection and the intention is not to suffer and or ‘engineer’ losses, but have a ‘peace of mind’ that genuine and accidental losses will be paid. The loss should be fortuitous the reason why insurers appoint investigators and loss adjustors to ascertain the nature of loss vis- a- vis the policy undertaken.

Without investigations and or loss adjustment, the ‘insurance pool’ would be wiped out by exaggerated and or fraudulent claims and the genuine clients would miss claim settlement.

It is important that you understand the insurance you have taken out even when you have been informed that it covers “all risks’’.

Not ‘all risks’ is ‘all risks’ as any policy will be subject to terms and conditions of cover. Whereas insurers over time have tried to simply policy contracts, we need to invest time to read the policy and ask all the relevant questions to ensure that the correct coverage is in place.

I remember an example of a potential client who took out workers compensation insurance, but in reality, he required employers’ malpractice liability cover, commonly referred to as directors & officers liability insurance.

He only realised the same when he was sued by an employee for wrongful dismissal and tried to claim against the workers compensation insurance.

From the word go, there was a very serious mis-sale of insurance. Whereas both insurances are important, however, they cater for completely different needs. Your insurance broker is able to work with you, analyse all your risks, explain the various coverages and together agree on a cost effective insurance programme.

The insurance programme will also depend on the business or individuals risk vis-a-vis the budget. Some of the risks are mitigated through specific processes and investments in systems and only transfer the residual risk to enable an efficient insurance program.
Lastly, a few pointers as to why insurance is a key strategic partner to us all in the very many ways. When you take up your life or endowment insurance, the harnessed savings just like NSSF, can be utilised to grow the economy in the short-term to long-term. The savings are invested as you await your return at the end of the policy contract and in some cases an immediate estate is created by the periodic payments of the premium.

The immediate estate is created on the payment of premiums and in case of early death, the settlement of the claim occurs and or on maturity of the endowment policy. Your individual and or corporate assets including the vital human resource are protected by the insurance program and hence guarantee of continuity of life or business. Banks are able to lend as they seek protection from any accidental or unforeseen event, carefully reviewed with the assistance of your Insurance consultant.

Needless to say, investors and innovators are able to risk new ventures by seeking risk mitigation, protection and transfer to insurance.
Let us all seek and embrace insurance as a strategic partner in life.

Mr Amogola is the chairman - Uganda Association of Insurance Brokers and chief Executive Officer of Minet Uganda Ltd .