Micro insurance law in the offing

Mr Edwin Kwesiga. COURTESY PHOTO

What you need to know:

  • The increased use of Mobile Network Operators has resulted in a subset of products that offer very low premiums for limited coverage.
  • This means one can take a cover for as low as shs5,000 and pay their premiums using mobile money.
  • These programmes accounted for 13 per cent of the identified lives covered in the region, but just 1 per cent of the total written premiums.
  • In many cases, the average premium per person per year was less than $ 1.

The Insurance Regulatory Authority is in the final stages of drafting rules and regulations for governing micro insurance in Uganda.
This will allow proper regulation and further increase penetration by allowing low income earners to access insurance products at minimal costs.

Mr Edwin Kwesiga, the chief executive officer of Ayo Insurance, said the regulation is a welcome development for the insurance industry.
“We are happy about the regulator considering the new micro insurance act because it will enable more insurance players to enter the market like us. There will be more access to insurance when there is more than one micro insurance player. The regulator needs to take in to consideration the needs of the population in Uganda,” he said.
He added that as a micro insurance player, they are excited about the Act. The regulator has been consulting the different players about the Act.
He was speaking recently at the launch of Fuuka don promotion, which is aimed at creating awareness about the Ayo micro insurance product.
“As more people become aware about the promotion we shall see more people enrolling for insurance cover,” he said.

This development comes as the attention is now being turned on micro insurance products as a possible frontier for growth in Insurance in Uganda, which have largely helped to increase the scale of those insured by offering affordable products for the low income earners.

According to the Landscape of Micro Insurance Africa report 2015, the total micro insurance market in the Africa region amounted to almost $ 647 million in premiums in 2014.
Looking at comparable data only, premiums show growth of 31 per cent since 2011. The related growth in insureds matched this at 32 per cent, indicating that products have generally kept similar price levels.

However, the increased use of Mobile Network Operators has resulted in a subset of products that offer very low premiums for limited coverage. In Uganda Ayo holdings partnered with MTN to provide insurance cover for low income earners. This means one can take a cover for as low as shs5,000 and pay their premiums using mobile money.
These programmes accounted for 13 per cent of the identified lives covered in the region, but just 1 per cent of the total written premiums. In many cases, the average premium per person per year was less than $ 1.

COMPOSITION
In 2017, the IRA licensed 29 Insurance companies (20 non-life or general insurance companies and nine Life companies), 6 HMO’s, 35 Insurance brokers and 21 Loss Assessors

Insurance industry Performance in 2016
According to the Insurance Regulatory Authority (IRA) report, in 2016, the gross premium underwritten by the insurance industry increased from Shs612 billion in 2015 to Shs634 billion in 2016, representing an overall growth of 3.6 per cent.

The report released in July says the non-life insurance business continued to dominate the industry in terms of premiums underwritten with 70.9 per cent written premiums down from 75.99 per cent in 2015.
The report says life insurance on the other hand accounted for 20.87 per cent of the premiums which was an increased from 16.36 per cent in 2015.

The Health Membership Organisations (HMO’s) accounted for 8.22 per cent of the premiums, an increase from 7.67 per cent in 2015.
The report recorded a drop in the insurance penetration from 0.76 in 2015 to 0.73 in 2016. Insurance penetration is a measure of the premiums under written against the GDP.