Insurers bank on bancassurance to grow insurance penetration 2022

Gross premiums underwritten through this channel have continued to grow, rising from Shs26b in 2018 to Shs83.3b in 2020. PHOTO/courtesy

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Bancassurance which is the most recent development in the distribution of insurance in Uganda has turned out to be a game changer in the insurance industry over the years, Racheal Nabisubi writes.

Bancassurance refers to a relationship between a bank and an insurance company that is aimed at offering insurance products or insurance benefits to the bank’s customers.

Despite it being introduced in 2017 (five years ago), data from Insurance Regulatory Authority (IRA) indicates that insurance written premiums under Bancassurance increased fourfold for the period ended June 2021; contributing at least 8.23 per cent of gross written premiums.

The growth, according to experts, signals the increased importance of the banking sector in the push to improve insurance penetration under Bancassurance. Bancassurance is a direct response aimed at tapping into the trust enjoyed by banks to grow insurance cover penetration.

Mr Kaddunabi Lubega, chief executive officer, Insurance Regulatory Authority (IRA) says bancassurance which is the most recent development in the distribution of insurance in Uganda has turned out to be a game changer in the insurance industry over the years.

“This arrangement between a financial institution (bank) and an insurer under which the bank distributes to its customers and prospective customers, through its distribution channels, insurance products or services of the insurer has led to an increase in the number of licensed bancassurance agents which currently stands at 20 that includes 18 commercial banks and two credit institutions,” Mr Kaddunabi says.

According to the available statistics, the gross premiums underwritten through this channel have continued to grow, rising from Shs26b in 2018 to Shs83.3b in 2020, representing a 220.3 percent cumulative growth over the period.

In 2020, premiums underwritten through Bancassurance Channel accounted for 7.83 percent of the 2020 total underwritten premiums compared to 5.5 percent in 2019.

Based on the statistics, he notes that banks have already distinguished themselves as a key distribution channel for insurance and there are high prospects for greater growth.

“Given this positive and steady trajectory, the relative importance and contribution of bancassurance to the overall sector growth is bound to be more pronounced in the years to come,” he adds.

Mr Makonese Tich, head, insurance, Stanbic Bank Uganda & EA, concurs with the reporting by the insurance regulator for the period ending June (which would be the H1), that the sector is growing, impressively.

He believes bancassurance will increase insurance penetration.

“Bancassurance grew by 54 per cent dominated by Stanbic bank as we consolidated our bancassurance market share to 21.2 per cent from 19.1 seen between January and March in 2021,” Mr Tich says.

He adds: “We think it is a good pace which can only speed up in the coming year with more partnerships between commercial banks and insurance companies, especially in the area of healthcare cover.”

Mr Tich elaborates that banks ought to be looked at as channels through which insurance firms can widen their market/client base as they get to sell insurance products to commercial bank customers.

In other markets, we have seen some commercial banks establishing their own insurance companies. In Uganda, there are more partnerships between commercial banks and insurance firms.

For instance, Stanbic bank and Prudential have a new partnership which is creating a healthcare cover product for Stanbic customers.

“What we can await to see is how customers will react to these innovative partnerships. But we need to see more education to drive product awareness and get our people to embrace insurance products in general,” he adds.

Currently, Uganda’s insurance penetration is among the lowest in East Africa at less than 2 per cent. However, insurance players are optimistic that there is good potential to grow it.


Mr Saul Sseremba, chief executive officer, Insurance Training College (ITC), says despite banks adopting bancassurance, one of the biggest challenges of bancassurance is lack of trust and professionalism.

“Banks are torn between taking their employees into bancassurance or sticking to saving and giving credit which is their main objective. This makes them skeptical on which route to take because they think it might increase their costs,” Mr Sseremba says, noting that in some banks, the heads of bancassurance are not looked at as major lines of business that can grow the bank.

This implies that they have to build the capacity be licensed and serve customers better which will in turn help deal with the trust issues

However, he adds that this can be changed once banks realise the full potential of bancassurance. Citing an example where in Kenya bancassurance is a big deal. This means some banks are doing more than insurance companies.

He elaborates that the college is encouraging banks to train staff into banking and insurance which helps to change the mindset of bankers.

“We want someone who does banking and understands insurance in their business. If we (insurers) are to ride on the back of banks, we will be able to grow bancassurance even more,” Mr Sseremba adds.


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