Uganda: Insurance Authority to Attract Micro Insurers
Uganda, June, 26 2015 -
The Insurance Regulatory Authority (IRA) will soon start licensing micro-insurance players to enable low-income earners access cheaper insurance services.
Speaking during last week's breakfast meeting, organized by the Insurance Institute of Uganda in Kampala, IRA Chief Executive Officer Ibrahim Kaddunabbi Lubega said the move sought to increase the uptake of insurance services in the country and boost penetration levels.
Uganda has the lowest insurance uptake in the region, estimated at 0.85 per cent, compared to Kenya's 3.5 per cent, Rwanda's 2.3 per cent and Tanzania's 1.1 per cent.
Kaddunabbi, who attributed the low levels of insurance uptake to limited innovations, especially in the micro-insurance market, said micro-insurance was a key driver of market growth and insurance penetration.
"Micro insurance touches the ordinary person and it provides social insurance, which is critical to develop any sector and Uganda has a significant untapped potential in that area," he said.
The micro insurance service providers will be subjected to fewer requirements compared to their traditional peers, according to Kaddunabbi.
While traditional insurance companies underwriting life insurance business are required to have minimum capital of Shs 3bn, and those underwriting non-life insurance business are supposed to have minimum capital of Shs 4bn, micro-insurance firms will be required to have minimum capital of Shs 100m.
Elvis Khisa, the chief executive officer of the Insurance Institute of Uganda, said fewer requirements for potential micro insurance players would make the products more attractive to both the public and insurance companies.
"Micro insurance service providers need to be incentivised because they deal in a sub-sector characterised by low returns, and which is perceived to be a risky area. Imagine we have only about 800,000 policies, yet there are about 35m people in Uganda," Khisa said.
David Baguma, the executive director of the association of microfinance institutions in Uganda, called on insurance players to tap into the unexploited microfinance sector to boost insurance penetration. Microfinance institutions have grown and now have a portfolio of Shs 400bn.
Despite the low penetration levels, however, Uganda's insurance sector has grown steadily over the years, with gross premiums increasing to about Shs 500bn in 2014 from Shs 34.8bn in 2000.