Lately, many of our commercial banks have developed creative ventures with which they hope to lure clients into taking up various loans.
These include offers for the acquisition of assets such as vehicles, home renovation, business start-ups, and even ceremonies like weddings. The immediate need for large sums of money by customers has been a significant driving factor into which the banks have tapped. This has thus created a high demand for short - term loans.
Many frequent road users and vehicle owners realize, and appreciate, the need for comprehensive motor insurance. This is especially so on Ugandan roads with our unpredictable drivers. Despite the importance of insurance, many individuals and even companies still do not insure. The reasons are varied and often amusing.
In reality, many people just cannot afford to free up lump sum payments to acquire insurance cover. Insurance is therefore viewed as a luxury. For this reason, commercial banks are offering loans for your insurance premiums. These are called Insurance Premium Financing. This is a pretty straightforward service. Like any other loan, repayment is over a negotiated period and rate, and allows you to cover lump sum premium payments.
Premium Financing offers the customer the flexibility to deal with debtors, and thus better manage their finances. A young 'corporate lady' earning a modest income, but proud of her first car, may view comprehensive motor insurance of about Shs 500, 000 per year as untenable.
However, if she could for example get a loan payable in 11 months at Shs 50,000 per month then insurance could be within her reach. Anyone earning a monthly or seasonal income could consider a similar approach to handle their insurance premiums. With insurance premium financing, you can have your cake and eat it too; you can have your life and assets insured, and your finances managed. If paying your insurance premiums upfront was your worry, then insurance is finally within your reach.
The author is a Chartered Insurer and works for the Insurance Regulatory Authority of Uganda.