20 January 2013

Uganda: Low Awareness Hinders Insurance

Kampala — The insurance fraternity is positive of the upcoming business opportunities coming their way but is conscious that the public's luck of awareness about the benefits of insurance will hinder their progress in delivery the service.

Ignorance among the masses over the years has been the reason why the insurance sector has been uninspiringly underperforming and efforts to attract public interest is sought after numerous campaigns were undertaken.

In addition to lack of awareness there is recognizable luck of trust in the public because in the past there were some service companies who were reluctant in settling claims and this led to loss of trust.

Some companies were not talking to the public to create awareness which has been actually the biggest problem of insurance industry in Uganda.

In an interview, Ms. Mariam Nalunkuma, the Information Officer at Insurance Regulatory Authority explains that there is an effort within the industry to combat the most striking challenges of ignorance to catch the attention of the public.

"Many people have a negative perception, are ignorant about insurance, they don't know the benefits of insurance, and this is bad for the sector.

"However as Insurance Regulatory Authority one of our functions is to have a sound and secure vibrant insurance sector and in a way we have to create awareness," Nalunkuma narrated.

Through radio, TVs, issuing of press statements and a monthly CEOs meeting the industry players are trying to deliberate on how they can get to interest the public.

"We have a comprehensive awareness program where we move to different parts of the country like Gulu Tororo, Jinja, Kasese, Kamuli , Fort Portal among other places.

"Our target is the business communities, people who have business, sensitize them on insurance policies, and tell them to guard themselves on various business risks," Nalunkuma explained adding that taxi drivers and bus owners are another target group.

Lillian Magara, a seasoned insurance business administrator shares Nalunkuma's sentiments revealing that the penetration levels are still very low, with Uganda having the lowest ahead of Kenya and Rwanda. Uganda's penetration levels stands at a decimal 0.65% a figure that justifies the need to reboot effort to interest the public in insurance.

"There are low levels of awareness; those who are aware of insurance don't have confidence in industry." Ms Magara stated.

Breaking Even

The future for the insurance industry in Uganda and the east African region is bright as insurers look for fresh avenues to earn revenue growth with service operators looking into micro insurance, life insurance, agricultural insurance and compliance from government to implement workers compensation.

The oil sector also presents immense business opportunities that the insurance sector can take up.

"With the discovery of oil, arguably the most capital intensive industry, in technology, equipments, exploration, production which requires investment of huge financial resources, one of the things one can do is to insure," Nalunkuma said adding that insurance companies and IRA have participated in the oil exploration bill to bring out their views and advise government.

"We feel that insurance should have an upper hand, this is a very risky venture, we want the insurance companies in Uganda to be given an upper hand to take up some risks that the industry presents," Nalunkuma added.

Through the Uganda Insurers Association a number of initiatives based on experiences are coming together to see that they can put together what they are calling specialized syndicate.

They are pulling resources together were if the risk is huge they will take the risk all together so they can benefit instead of oil industry seeks for service outside Uganda.

"If we get involved in the oil our local companies are going to build capacities. Our local companies will gain experience say in underwriting policies targeting the oil industry."

She adds "We are also looking at an opportunity of micro insurance, if we want even the low income earners; people like in Kikubo, Owino not the big entrepreneurs those one know insurance. The low income earners have policies that can cover them," Nalunkuma further stated.

Unenviable growth

Despite registering less desired figures representing the insurance industry growth, stakeholders are optimistic the sector is growing albeit at a very pace.

"We are certain that we are going to have growth, it might have risen for 2012 because of the intensified awareness campaign and the new opportunities we want to tap into.

"If these opportunities are tapped into by the service providers and IRA we are certain growth will be there. We are also promoting life insurance; people should save for their lives," Nalunkuma revealed.

The hope comes from improving sector growth recorded in 2011 that saw a 23.52% improved growth in the industry.

During the year 2011, insurance premium written rose to UGX.296.44 billion from UGX 239.99 billion during 2010, accounting for a 23.52% growth in the industry.

Non life insurance premium collections totalled UGX 262.24 billion, up from UGX 216.34 billion registering an increase of 21.21%. In addition, life premium collections totalled UGX 34.19 billion in 2011, against UGX 23.63 billion collected in 2010, with a 44.68% increase. Of the total premium income written, non-life contributed 88% while life contributed 12%. With this background insurers are hoping for a robust 2013 and the years to come.

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