Housing Finance, Absa top insurance earnings

Friday October 30 2020
finance001pix

Earnings from bancassurance have become a new revenue stream for the banking sector in Uganda. PHOTO/FILE/NMG

By Christine Kasemiire

Housing Finance Bank and Absa recorded the highest amount of commission earned from the insurance business signed up under the bancassurance segment.

Introduced in 2017, bancassurance permits commercial banks to underwrite insurance business on behalf of insurance companies and in turn, earn a commission.

According to data from Insurance Regulatory Authority (IRA), banks contributed 5.7 per cent of the total gross written premiums by the insurance sector in the first quarter of 2020.

The insurance industry registered Shs324b in total gross written premiums in the first three months of 2020, with Shs18.6b coming from commercial banks. 

Commercial banks contributed Shs6.3b to premiums collected for the general or non-life business segment and Shs12.3b to the life insurance, from which they earned a combined sum of Shs3.1b in commission. Shs2.3b was earned from life while Shs838m came from general insurance.

Mr Protazio Sande, the IRA market research and development director, said banks get more from the life business because of the nature of credit issuing they undertake. 

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“It is because their strength is mainly in loans so banks leverage on that [loans] to offer credit life or loan protection,” he said, noting credit life or loan protection is an insurance position that guarantees a loan will be repaid even in the event of death of the borrower or permanent disability.

“If the client dies when the loan has not been fully repaid, the outstanding balance is cleared by the insurance company and this is mainly on death and total permanent disability,” he said.

Banks act as middlemen between insurance companies and the public, a service from which they earn commission.

Housing Finance Bank, according to industry data, underwrote the most general business registering Shs1.2b from which it earned Shs190m.

Stanbic Bank, which was the first to receive a bancassurance licence came second, having secured Shs909m in premiums, earning Shs118m.
Post Bank with Shs833m in written premiums earned Shs73.7m in commission. 

Dfcu Bank, despite registering the fourth highest written premiums of Shs548m came after Centenary Bank and Finance Trust bank who earned Shs61.1m and Shs53.8m in commission earnings, respectively.

Gross written premiums are not entirely reflective of commission earned as some banks collected more but earned less commission.

For instance, Absa Bank earned the highest commission from life business with Shs671m from Shs2.8b in written premiums, having issued 22,407 policies compared to Stanbic Bank, which earned Shs608m despite issuing 94,625 policies and earning Shs3.2b in premiums.

Standard Chartered Bank earned the third highest commission of Shs320m while Orient Bank followed with Shs154m. Centenary and Eco Bank earned Shs119m and Shs115m, respectively. 

Commission earnings from written

General Insurance 

Commission

Life Insurance

Commission

Housing finance

Shs190m

Absa

Shs671m

Stanbic

Shs118m

Stanbic

Shs608m

Post bank

Shs73.7m

Stanchart

Shs320m

Centenary

Shs61.1m

Orient

Shs154m

Finance trust 

Shs53.8m

Centenary

Shs119m

editorial@ug.nationmedia.com

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