A Stanbic Bank stand during a weeklong exhibition in Kampala to encourage customers to take up insurance. FILE PHOTO | NATION
Despite a modest uptake of bancassurance products since October
last year, increased competition among commercial banks and a steady
growth in new investments in the information and
communication technology as well as the leisure and hospitality sectors might boost future demand, experts say.
communication technology as well as the leisure and hospitality sectors might boost future demand, experts say.
Bancassurance products refer to insurance policies sold by commercial banks to their clients on behalf of insurance companies.
This
is a strategic partnership meant to grow in the insurance industry by
expanding the customer base, making distribution networks cheaper and
running joint marketing campaigns.
Insurance Regulatory
Authority of Uganda (IRAU) data put total insurance premiums collected
from bancassurance channels at between Ush4 billion ($1.07 million) and
Ush5 billion ($1.3 million) between October and December 2017.
The distribution of sales revenue among the participating banks and insurance firms is not yet available.
Commissions
earned by banks from these products lie between 10-23 per cent of the
value of each policy sold, based on terms agreed between different banks
and insurance companies.
This roughly translates into minimum commission incomes of
Ush400 million ($106,907) to banks during the last three months of 2017.
So far, 10 out of 24 Ugandan banks have acquired
bancassurance business licences since the regulations were gazetted last
July. Several other lenders have applied for these licences too, IRAU
officials say.
Some of the banks that have obtained
bancassurance licences are Stanbic Bank Uganda, Barclays Bank Uganda, NC
Bank Uganda, Diamond Trust Bank Uganda and United Bank of Africa
Uganda, a subsidiary of Nigeria’s United Bank of Africa.
Participating
insurers include Sanlam Insurance Uganda, Jubilee Insurance Company,
UAP Insurance Uganda, Insurance Company of East Africa Uganda and NIC
Holdings.
Minimising risks
The modest uptake of bancassurance policies witnessed since last year is partly reflected in some banks’ sales data.
Statistics
from Diamond Trust Bank Uganda, for instance, indicate that the lender
sold 350 life insurance policies between November 2017 and April 2018,
with monthly premiums ranging from Ush150,000 ($40) to Ush700,000
($187).
The bank sold 100 general insurance policies
during the same period, comprising motor accident covers, property
insurance and workmen’s compensation.
“The projected
impact of bancassurance business on Uganda’s insurance industry
penetration rate against GDP is not yet clear but this measure is not
sufficient in assessing real growth patterns in this industry.
“We
are considering alternative benchmarks, like number of insurance
policies sold per year and the effect of changes in consumer prices on
people’s appetite for insurance. We expect significant growth in
bancassurance-related premiums given more banks are coming on board,”
said Protazio Sande, IRAU’s assistant director for market research and
development.
“Total insurance premiums collected by
insurers grossed Ush634 billion ($169 million) in 2016 while the overall
industry penetration rate stood at 0.73 per cent.
Some
experts are counting on new investments being undertaken in the ICT and
leisure, plus hospitality sector, to drive future demand for insurance
products as investors seek to secure new, high-value assets from damage
or theft.
For example, telecommunications companies
usually invest more than $50 million after every three years in new
network infrastructure needed to absorb higher customer numbers, user
traffic and also minimise risks of cyber attack.
In
contrast, smaller technology firms are actively investing in new digital
payments platforms, cloud computing servers and data storage centres
that cost an average of $1 million to $5 million per unit.
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