Uganda’s insurance players are lobbying hard to ensure that the penetration rate moves above one per cent and closer to regional peers such as Kenya, writes JUSTUS LYATUU.
Uganda needs to find ways of expanding its economy if the country’s insurance penetration rate is to match its regional peers, a top insurance expert has said.
Latimer Mukasa, the managing director at Phoenix of Uganda Assurance Company Ltd (Phoenix Assurance), says countries such as Kenya, which has insurance penetration of 2.8 per cent, continue to widen insurance coverage because of the size of their economies.
“You can’t have a tiny economy and expect to have a huge insurance industry. The sudden growth of China’s insurance industry is directly correlated to its ever-growing economy,” says Mukasa.
Relatedly, in Africa, the likes of Kenya, South Africa and Egypt, which have enjoyed good, stable political environments, and are larger economies than Uganda, have healthier insurance industries, he adds.
Besides, one cannot completely disregard Uganda’s economic challenges over the years. The currency devaluation in the late 1980s, which dampened the confidence the public had in the insurance industry, saw the products on life policies completely becoming worthless.
“Remember, in this industry we sell a promise; that in the event of one suffering a loss, we are there to cover this loss. But with the devaluation, an entire generation of people completely lost faith and confidence in insurance,” Mukasa said.
He added: “When the economy was difficult and people were living from hand to mouth, insurance was completely forgotten. Even now, when things become a bit tight, and there is some kind of cashflow squeeze, insurance drops to the bottom of people’s and businesses’ priority lists.”
A tight economy, which has been further burdened by an avalanche of taxes, would, therefore, not portend well for Uganda’s insurers, one would argue. Mukasa remains optimistic, however.
His hope is in the Insurance Act 2017, which, among others, require marine insurance, going forward, to become a preserve for Ugandan insurers, after a lot of lobbying by the industry.
The other target is having government insuring all its assets such as vehicles and property, instead of just paying for replacements when they get damaged.
“Both the insurance industry and the government would mutually benefit were the state to underwrite its assets and properties,” he says.
In addition to the compulsory Workers Compensation Insurance cover, Public Liability, Fire (for properties) and Contractors, all risk insurance covers should be made mandatory to provide protection to members of the public as well as investors, Mukasa says.
“There is also need to review downwards the amount of Stamp Duty being charged on insurance policies. For example, on Third Party Insurance, the component of stamp duty is higher than the basic premium. Furthermore, there is a case for insurance to be zero-rated as this will result in increased uptake,” he notes.
Also, Phoenix Assurance is looking at embracing innovations that can help it achieve operational efficiencies.
“In the USA, a company called Lemonade settles at least 25 per cent of its claims within three seconds. This is possible through its phone app, which relies on artificial intelligence. So, in this world of disruptive technologies, it is prudent to challenge ourselves to be better, every day,” says Mukasa.
He noted: “While each claim is unique, Phoenix always aims to clear a payment within a week, from the day we receive all the necessary documentation. Now, the challenge we have to confront is how to bring that period down to, say, four days or even further to two days.”
It is important that any business is dynamic and willing to understand where it stands at any one time while also appreciating the kind of competitive environment it is operating in, he concludes.