Kampala — Regulations that allow commercial banks to sell insurance products - Bancassurance - will be out this month, Insurance Regulatory Authority (IRA) has said.
Mr George Okotha, the director operations at IRA, told insurance and bank representatives on Wednesday that the regulations had been finalised.
"Bancassurance regulations will come out next month - July 2017. There has been a lot of input from all the stakeholders in the industry. We expect to begin licensing financial institutions as soon as the regulations come into force," Mr Okotha said at the Bancassurance forum.
The regulations form the operationalisation of the Financial Institutions (Amendment) Act 2016, which allows banks to act as agents of insurance companies and start selling insurance products.
The decision to amend the Act to include bancassurance was made to increase insurance uptake in the country that is at a paltry 0.85 per cent of Gross Domestic Product.
In the regulations, banks will be allowed to enter into agreements with any number of insurance companies to sell their insurance products.
"We're not limiting the number of insurance companies that a bank can partner with. We expect that banks and insurance companies develop the products, which we shall approve. No product shall go to the market without our approval," he adds.
Banks will be required to hire a specific officer to handle clients who can sell insurance products. Additionally, commercial banks will also be required to get approval from Bank of Uganda (BoU) before they can go to IRA for a licence.
Mr Mark Johnson, business development director, at RGA (RGA is a UK-based reinsurance company that carries out several global surveys on Bacanssurance), told the delegates that bancassurance had the potential to grow the insurance sector because of the banks having access to a good number of customers that take loans or make deposits. He, however, noted that the challenge will be getting bank staff to understand selling of insurance products.
"For banks, the start will require training staff to deliver the correct policies. They have to get the training right for the market to feel the impact of bancassurance products," he explained.
It is expected that for the start, the most popular insurance products will be on loan facilities or other credit lines that often drive higher margins.