In nine months, 20 commercial banks have earned a combined commission of Shs6.5b for selling both life and general insurance.
According to figures released by the Insurance Regulatory Authority (IRA), banks pooled Shs1.5b of commission from selling general insurance while life contributed the lion’s share with more than Shs5b commission in the period.
Role of banks
Banks act as intermediaries through which the public buys insurance and are paid a commission.
The financial institutions according to the figures collected more than Shs33b in premiums from which Shs6.5b was earned in commission.
“Total Gross Premium Written through bancassurance agents amounted to Shs33.7b as at end of third quarter of 2019 contributing 4.5 per cent of the total industry premiums of Shs748b. We, therefore, continue to pledge our commitment in providing the required support to enhance the contribution of this new distribution channel towards the sector,” Mr Ibrahim Al Haj Kaddunabbi Lubega, chief executive officer IRA, said recently in Kampala.
Stanbic Bank, the country’s biggest bank by assets and first recipient of the bancassurance licence earned the highest, receiving close to Shs2b in combined commission. It raised Shs1.6b in life and Shs350m in general insurance.
Absa formerly Barclays Bank and second recipient of the bancassurance licence received the second highest commission attributed mainly to life insurance where it got Shs1.5b yet only Shs170m from general insurance.
However, Mr Kaddunabbi noted that implementation of the regulation had to be improved.
He faulted the insurers for reinsuring a lot of their risks which constrains cash flow, limiting their ability to pay large value claims.
Reinsurance is insurance for insurers taken with the aim of limiting their liability to some risks covered.
According to the numbers, 43.3 per cent of the general insurance premiums and 13 per cent of life premiums collected during the period were ceded to the reinsurance company.
Despite introduction of a stiffer cash and carry regulation this year, limiting insurers to issuing insurance on a cash only basis, the industry has registered an improved performance jumping to Shs748b in gross premiums for the nine months of 2019 from Shs658b during the same period last year. General insurance contributed Shs490b while life insurance pooled Shs199.5b.