We are a democratic country blessed with a stable economy with a vast number of attractive investment opportunities. This is evidenced by the fact that, when it comes to insurance, in particular, we have grown from less than 7 insurance companies (at our independence in 1962) to 29 insurance companies and 1 reinsurance company in 2017. These companies are licensed by the Insurance Regulatory Authority of Uganda (IRA) to write both Life and General (non-life) insurance. We also have four trade associations which represent the views of their members to government and related stakeholders to ensure that the consumers’ needs are safeguarded at all times and have a dedicated organization, the Insurance Institute of Uganda (IIU), whose mandate is to promote professionalism through industry training and capacity building.
In terms of premium written, according to provisional figures from the IRA, we wrote estimated ugx 465 Bn ($129M) in Gross premiums of which Ugx 360bn ($ 100M) was written in Non-Life Insurance and Ugx 97Bn ($ 27M) in Life representing a growth of only 4% from 2015. (These results only consider insurance company performance figures and exclude Health Membership Organization (HMO) performance figures).Over the same period, we also paid Ugx 110bn ($ 31M) in net claims, which we believe can be, in part, attributed to a more informed clientele who understand the claims process, as well as the firm, claims payment requirements which are, on a whole, being adhered to.
Prior to 2012, the industry grew on average 18-20% prior to 2012 and since has grown on average 11.75%. The decline in performance has largely been attributed to the current tax policy which is slightly less positive towards the sector. We are currently the 3rd most taxed industry in Uganda following Beverage (alcohol) and Telecommunication having to bear, among others, a stamp duty of Ugx 35,000 ($ 9.7) which is 7 times what other industries pay in the same duty, Value Added Tax on Insurance services, With Holding Tax on Reinsurance Services and a training levy.
The industry through the Uganda Insurers Association (UIA) is currently lobbying for a reduction in the tax component on insurance services and so far, the government has reduced the stamp duty on micro insurance products from Ugx 35,000 ($9.7) to Ugx 15,000, ($4.2) which while an improvement, still means that micro products are still a little too expensive for the ordinary Ugandan. We will continue lobbying for the previously applied Ugx 5,000 ($1.4) stamp duty to be reinstated on these and other individual products with the aim of ensuring that insurance is accessible to all our populations.
Given the fact that we are lobbying for a more positive policy environment and that penetration stands at less than 1%, the industry put aside time to ask questions about just how much the market understands our products, if we have suitable products and if we do, how we are getting our products to market and how we can improve our services overall.
The result of that exercise was a 10 year Market Growth and Development plan whose main goal is to see penetration grow to 3% by 2025. In addition to answering the above questions, we carefully looked at our demographics and consumption patterns and determined four key intervention areas which when implemented should see us hit our goal. We identified the need to increase the understanding and appreciation on insurance, the need to leverage technology, to continue lobbying and advocating for the good of the industry and to build our institutional capacity.
We then broke these down into bite size implementable blocks in view of other changes in the environment in Uganda to ensure further success. We, for example, took into consideration the fact that the majority of our population falls into the lower income household bracket and that the majority of these are either informally employed or employed in the Small Medium Enterprise (SME) category. In order to reach this segment, it became clear that we needed to simplify our explanations and messaging about our services (from the education standpoint), simplify our products and make them more relatable to this category and make them more accessible (from a product development and technology standpoint) and ensure that these products are affordable (from a pricing and lobbying standpoint).
With all these aspects aligned, we see the micro insurance category space growing exponentially over the next 3-5 years.
So far, a few insurance companies are providing micro insurance products with the majority covering personal accident with a medical and Life benefit, Medical Insurance and Life Insurance. Although most of these products are relatively new (most introduced within the last 4 years), we anticipate that many more products will be introduced in the near future.
We also anticipate that following the introduction of the Uganda Agriculture Insurance Subsidy Program in 2016 which provides a 30-80% premium subsidy to farmers (both small scale (less than 5 acres) and large scale farmers(5 acres or more)), we will see a shift in how both the insurers and the market at large view insurance. We also face similar challenges with this category as with the micro insurance category stemming from the limited understanding of insurance as a subject and then the benefit to the farmers who are situated across the country. We are similarly working to educate and raise awareness particular to this category and make use of our partnerships with government agencies, agriculture extension officers, and SACCOS to infiltrate these groups and make sure this service is relevant to them. In terms of lobbying, we are advocating for a reduction in the stamp duty to Ugx 5,000 ($1.4) and a removal of Value Added Tax on agriculture insurance.
In terms of more recent changes in regulation, the Financial Institutions Act was amended in early 2016 and now allows for insurance companies to sell their products through banks distribution channels. The financial advantages of banks and insurance companies partnering through bancassurance agreements notwithstanding, insurers will now be able to use the bank branch networks which will increase access to our services. We are similarly now speaking with the banking and related sectors to raise awareness about this change to ensure that when the regulations are passed. We expect that they will be passed by mid-2017.
We are also looking at how the insurance industry can support the nascent Oil and Gas sector extending to building our internal capacity through the establishment of the Oil and Gas Co-Insurance syndicate which was approved by the IRA in October 2016. We are now lobbying with Government and related entities to ensure local content is upheld and that we, as the local industry, are able to write most of the risk related to this sector.
We are confident that if the Market Growth and Development plan is executed as envisaged, we will see a more informed customer who understands insurance, understands risk and the applicable risk mitigation measures, can access both information on and insurance services through different technological avenues and makes insurance a priority.
Public Relations and Advocacy
Uganda Insurers Association
This article originally appeared in the 4th edition of the Inside Insurance Magazine