Insurance defies economic slowdown to record growth

Non-life insurance, among which include motor third party, continues to dominate written premiums but the regulator recently noted life insurance was posting rapid growth. Photo | Stephen Otage 

What you need to know:

The Insurance Regulatory Authority says the growth is a statement of the sector’s resilience in an economy that continues to contract as a result of challenging macroeconomic fundamentals, characterised by heightened inflationary pressures

Insurance premiums grew to Shs711.7b in the first half of 2022 shored up by improved performance in non-life premiums. 

During the period ended June, insurance premiums grew by 18.6 percent with non-life cover contributing 58 percent or Shs406.37b of gross written premiums, which was a 4 percent growth from Shs391b registered in the same period in 2021.   

While releasing the results, Mr Ibrahim Lubega Kaddunabbi, the Insurance Regulatory Authority (IRA) chief executive, noted that the growth is a statement of the sector’s resilience in an economy that continues to contract as a result of challenging macroeconomic fundamentals, characterised by heightened inflationary pressures.  

However, he indicated that non-life insurance continued to dominate, noting that this was a sign sustained growth in middle class citizens who use insurance to protect their assets. 

Gross claims paid out for both life and non-life as well as health membership organisations grew to 34.1 percent or Shs242.5b from 27.2 percent paid out in the same period in 2021. 

The growth, Mr Kaddunabbi said, was evidence of commitment by players to honour their obligations once sufficient evidence has been provided. 

During the period, life insurance generated Shs243b, representing a 33 percent growth from the Shs184b posted in the same period in 2021. 

However, premiums from health membership organisations recorded a 13 percent decline, dropping to Shs22b as a result of a recurrent effect of acquisition of IAA Healthcare by Prudential Life Assurance.

Dedicated health insurer, which was licensed in the third quarter of 2021 generated Shs40.3b, growing from Shs31b posted as of December 2021.  

Micro insurance premiums contracted to Shs317.4m from Shs335.4m, representing a 5.4 percent drop blamed on a volatile economic environment that has impact both micro and personal incomes. 

Premiums written through brokers grew to Shs186.4b, accounting for 26.2 percent of gross written premium. 

The brokerage business continue to be critical in insurance underwriting, amid increased use in technology and product portfolio. 

The insurance sector has in the last five years seen heightened product innovations with major breakthroughs such as Bancassurance, which has been a key factor in improving both penetration and gross written premiums.

During the period, gross written premium collected through the Bancassurance grew to Shs62.3b from Shs49.1b, which signifies its impact of the industry. 

Outlook        

According to IRA, the sector is projected to grow further, amid a hardening economic outlook, characterised heightened costs of living and reducing disposable income.

However, IRA noted that this will inevitably impact demand for among other things, insurance but the regulator remains optimistic due to the resilience demonstrated during a prolonged period of crises in addition to expected government releases for public infrastructure. 

This, IRA says, will sustain the sector’s growth to above 15 percent in the next quarter but with a 12 percent decline by the end of the year.

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