Kampala — THE insurance industry hype may be blinding, but only six out of every 100 Ugandans have an insurance policy.

The outlook gets grimmer in rural areas where just three out of the same number have an insurance cover to their name.

This is according to a survey report - National Survey on Access to Financial Services in Uganda - produced by Steadman Group.

This comes on the back of a recent 2007 preliminary report compiled by Uganda Insurance Commission that indicated that industry's performance declined last year by about 8 per cent.

The report raps players for lack of innovation and over concentration of the services in urban areas as some of the major reasons for the decline.

About 56 per cent respondents to the report said they cannot afford insurance services against 45 per cent who are ignorant about it.

This partly explains why Uganda has one of the lowest market penetration rates in the world.

Insurance figures

Currently insurance total premium is worth $51 billion with Gross Domestic Product at $9 billion resulting to penetration rate of 0.57 per cent, ten times lower than Kenya's 2.51 per cent.

Analysts say the sector needs urgent reforms to play a bigger role in the economy which has recorded steady growth in the last four years.

Mr Elly Twineyo, an insurance expert, said poor distribution and marketing of insurance products has been faulted for the alarmingly low intake of products.

"We need reforms to push the industry towards greater innovation and new marketing models that will enable more Ugandans to buy insurance products," he said.

Awareness campaign

Following this downward trend, Uganda Insurers Association (UIA) has launched a three-month awareness campaign starting this month to possibly overturn the fortunes of the business.

"It is difficult to predict how this campaign will affect the uptake to be able to put a specific target" said Dr Olli Pekka, the new chief executive officer of UIA.

He said the campaign will target rural areas in a two-phased approach based on the benefit, why, where and how to access insurance covers the report having also revealed that 19 per cent of the studied sample did not know how to get insurance.

This will end the selfish individual marketing by players and craft a joint approach to hit the desired impact on the public.

However, UIA Chairman Solomon Rubondo said players would continue with private marketing to promote their new brands and their images.

He said there is a potential Shs100 billion that could be realised if the campaign succeeds a figure which could triple over a period of five years.

At the back of this will be the question of affordability to majority Ugandans.

Mr Rubondo said with only 20 players, the trend of growth in the number of players will inevitably change the premium rates.

"Just like the banks now, our rates will scale down as more players enter the industry," he said.

Policy issues

He said the government has to support the industry by reducing taxes on potential sectors that bring in premiums like the manufacturers.

The operation costs resulting from power rationing has stopped many people from setting up businesses yet taxes remain an issue.

"Given that 95 per cent of the premiums come from non-life insurance, there is need for tax subsidies to attract more investors to the business," he said.

UIA is currently engaging the government to insure some of its assets, a move that could boost the industry.

The association also plans to set up structures to invest in life and health insurance.

The government has earmarked Shs280 billion to settle pension arrears through establishing a regulatory framework to protect people's saving in accordance with best international practices.

Current challenges

That not withstanding, players are still concerned about the need to review some sections of the law.

American Insurance Group Managing (AIG) Director Alexander Wanjohi decries the tradition of selling insurance on credit.

Under the Insurance Act, brokers are allowed up to 60 days from the date of inception of cover to remit their client's premium to insurers.

But this is breached to even 180 days which he says is affecting players who have already assumed the risk.

"It is high time this law is amended that the insurer does not assume the risk before receipt of the premium" he said recently.

As a result, he said players are not competing for quality service delivery but price levels.

Some assets located in Uganda are insured abroad and yet the law requires that all assets be insured here.

If this law is enforced with many other weakened laws, it could increase insurance growth by over 30 per cent.

Road licence ban

United and Provincial Uganda Managing Director Mathew Koech points out that government's recent scrapping of the road license fee was rushed without putting in place mechanisms to protect insurance companies.

This has seen many motorists ignore paying for the Third Party premium which is suffocating premiums.

"Previously it was mandatory for motorist to produce valid third party Insurance which is not the case today," he said.