Uganda’s insurance companies seek growth

  AAR medical personnel attend to a patient. The company has expanded and become a fully fledged insurance provider. Photo/FILE  Nation Media Group

 

By DICTA ASIIMWE Special Correspondent

In Summary

• Market size as measured by insurance penetration expanded by just 0.06 per cent between 2008 and 2011 despite the entry of at least five new insurance companies. The new companies are Britam, APA, Liberty Life, Nova and Sanlam.
• The fact that the insurance sector makes a killing on the statutory motor insurance explains why the sector is pushing for the full implementation of workers’ compensation, a move that would boost incomes from statutory cover.

Uganda is lagging behind in introducing new insurance products that would lead to an increase in market size despite an increase in the number of players.

Market size as measured by insurance penetration expanded by just 0.06 per cent between 2008 and 2011 despite the entry of at least five new insurance companies. The new companies are Britam, APA, Liberty Life, Nova and Sanlam.

Premiums income as a percentage of gross domestic product grew from 0.59 in 2008 to the current 0.65 per cent in 2011 and players say that these figures are not likely to hit the 1 per cent mark in June when the Insurance Regulatory Authority (IRA)is expected to release performance figures for 2012.

Kadunabi Lubega, chief executive officer at IRA, attributed the failure to develop new products to the fact that insurance companies are making enough profit for their shareholders and face no pressure to venture into new areas.

Mr Lubega said the high profits are a result of the continued growth in aggregate premium income, which rose from Ush239.83 billion ($89.6 million) in 2010 to Ush296.83 billion ($110.8 million) in 2011 signifying at a 23.6 per cent growth.

Life insurance, which currently contributes over 57 per cent of the world’s premiums, only contributed 12.2 per cent in Uganda.

Non-life insurance is the most liquid in Uganda, with motor insurance, which mostly depends on statutory third party insurance, contributing the highest.

Motor insurance contributed Ush81.2 billion ($30.5m), double the income contributed by fire, the policy that brings in the second highest premium.

Fire insurance contributed Ush43.1 million ($16m) but the income ceded in claims and paying reinsurance companies is high at Ush32.5 million ($12.1m) and profitability stands 24.6 per cent.

The fact that the insurance sector makes a killing on the statutory motor insurance explains why the sector is pushing for the full implementation of workers’ compensation, a move that would boost incomes from statutory cover.

Few employers currently take out cover for workers’ compensation, keeping incomes from the policy to just Ush11.5 billion ($4.2m); although claims on this money are also minimal at just Ush3.1 billion ($1.15m).

Mr Lubega added that the insurance sector also wants the government to quickly table and pass the health insurance law, which would lead to the contribution of a mandatory 8 per cent of every employee’s salary.

Employers would contribute 4 per cent of the employee’s salary while another 4 per cent of would be deducted from the employee’s salary to cover health insurance.

Government failed to table the health insurance Bill in 2006 after formal sector players said it would make paying workers expensive.