15 December 2012

Uganda: Workman's Insurance a Must for Construction Companies

The state minister for works, Eng. John Byabagambi has said the Government will crack down on construction companies that do not have workman insurance cover for their employees.

"We have many on-going road construction projects. So many accidents happen when works are going on yet some of these workers are not insured.

It is the Government's policy that all workers are insured. Some companies overlook this (workman insurance), especially the local companies. We are hunting them down one by one," said Byabagambi.

The minister made the remarks recently when the Insurance Company of East Africa (ICEA) was settling a claim to a Chinese road contractor.

Sh960m was paid to China Communications Construction Company (CCCC) by the insurance company after flash floods and heavy rains swept away works on the Mbarara-Kikagati-Murongo road in Workman's insurance a must for construction companies May this year.

Byabagambi said insurance is one of the ways of guaranteeing that the Government's money is well spent on contracts. Citing the case of the bicycles saga, the minister said the Government could have lost out if the contract had not been secured.

Lack of integrity

He cited the lack of integrity by many local construction players as a major reason for the low uptake of road insurance in the country.

"The local construction industry is very weak. We are working with people who are motivated by profits, with little regard to professionalism," he said.

In a bid to ensure due diligence, Byabagambi said the works ministry is implementing three policies.


The first policy is the issuance of bid bonds that can now be offered by local insurance companies. Secondly, the ministry is implementing advance security bonds, which allow a contractor to seek advance payment upon the award of a contract.

However, Byabagambi said these are still a preserve for banks.

"We have decided that these bonds should remain with banks since they involve huge sums of money. Even then, we work with only reputable banks," he said.

Lastly, the ministry has rolled out performance bonds. The minister said these go to insurance companies.

"If a company gets a project but fails to perform to desired standards, we hold the insurance company accountable," he explained.

On the local companies now offering this bond, the minister said:

"This shows that the economy is now responding positively that a local company can pay a compensation of up to billions of shillings."

John Karionji, the CEO of ICEA, said very few insurance companies in Uganda are venturing into road insurance because it is "specialised".

"It (road insurance) requires a company with a strong asset base, with the backing of re-insurers and requires people who are technically sound because assessing a road risk is complicated," he said.

He added that the insurance sector in Uganda is struggling to penetrate the masses because of the general feeling that insurance providers take too long or never to pay claims.

Insurance penetration in Uganda stands at less than 0.65%.

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