Insurance is not only for the rich

Tuesday March 24 2020

Motorcyclists carry passengers in Kampala.

Motorcyclists carry passengers in Kampala. Insurance companies have designed policies for the low-income boda-boda cyclists with compensation of up to Shs1 million in case of death. PHOTO BY ERONIE KAMUKAMA 

By Sheebah D. Nalwebuga

Ugandans still perceive insurance as very expensive, a service for the few rich individuals, a luxury, and an investment among other notions. In the past, low-income individuals have felt that they cannot afford premiums or fees because they lack regular jobs, or because they cannot read or write and as such, have not embraced insurance services.

However, this trend has since changed and now more than ever insurance companies are developing and selling insurance services to all regardless of their social status.

According to the annual Insurance market report of 2018, Gross Written Premiums increased from Shs728.53 billion in 2017 to Shs856.22 billion in 2018, representing a 17.51 per cent growth.
This was attributed to a number of efforts made by different insurance players to design policies that generally address the needs of the clients, clear and more flexible with premiums, thereby making it affordable to the low- income communities.

The growth in the premiums is still skewed towards middle and high-income clients. However, there are clear opportunities to have insurance penetration and uptake improve over the years by focusing also on those at the low-income pyramid.

Micro insurance has registered significant success in Africa and Asia. According to the International Labor Organisation Impact Insurance, in Africa, micro insurance has been growing at an average of 200 per cent over the last five years.

In Uganda, there are great hopes since in 2018, the first micro insurance company registered a total of Shs24.32 million in premiums. In the year 2020, a second microinsurance company has been licensed. Could Micro insurance then be the solution to the needs of this untapped segment of Uganda’s population?

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According to Kevin Hogan, the chief executive officer of AIG Global Consumer Insurance, “Micro insurance is not only a viable business, but one that presents a unique opportunity to serve individuals and small business owners who don’t typically have access to our world class products and services.”

Micro insurance presents an opportunity to protect low income people against specific risks in exchange for a regular payment of premiums whose amount is proportional to the likelihood and cost relevant to the risk. Potential clients with little savings stand to benefit from micro insurance in case of illness, injury or death.

Mr Charles Mugerwa, a member of Century Boda-boda Motorcycle Association benefited from his local insurance scheme where he was contributing Shs6,000 per month. In May 2019, he was involved in an accident that left him injured and his motorcycle damaged.

After reporting to the insurance company, he was compensated and now has a new motorcycle. Had he not been insured; his family would have suffered greatly since he is the bread winner in the home.

Poor people are the most exposed to risks yet they are the least capable of handling the associated consequences.

Low income earners are exposed to risks such as illness, death, disability, property loss, risk of loan among others.

All of us are likely to face uncertainty at any given stage in life, but how prepared are you?
With the various fatal accidents registered each year, Insurance companies have designed policies for the low-income Boda-Boda cyclists providing compensation of up to Shs1 million in case of death, disability, critical illness or medical expenses resulting from bodily injury and illness sustained as a result of an accident. Such policies are also providing up to Shs500,000 for funeral expenses.

The author is the market development officer at Insurance Regulatory Authority of Uganda.

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