It will take mass uptake of insurance products and innovative ways of delivering them to rejuvenate the dipping performance of the sub-sector, a leading industry player has said.
According to Insurance Regulatory Authority (IRA) the sector profitability, particularly of non-life insurance policies, the biggest premium contributor for insurance companies fell by 14 per cent in the year 2017, due to an increase in the number of claims.
The reduction in profitability, according to the industry regulator will call for more action from the insurance companies, whose premiums arise mainly from non-life insurance.
In an earlier interview, Mr Deepak Pandey, the Jubilee Insurance managing director, told Daily Monitor that reduction in profitability was a global problem that will need insurance companies to cut administration costs and increase premiums to stay afloat.
But for the managing director of Liberty Life Assurance, Mr Joseph Almeida, it will take more than just that.
In an interview with the Daily Monitor last week, he seem to argue that the secret lies with the mass roll out and acceptance of products such as education and health insurance.
This he believes will go a long way in reinvigorating the sector whose penetration has for years stagnated at less than one per cent.
Being one of the leading market leaders in provision of life and health insurance needs in the country, he said they are already testing the waters with an education policy meant to lift the school fees and tuition burdens off the shoulders of parents and guardians.
The market reception towards this innovation has so far been positive, an indication of where the insurance industry players need to begin to focus on. A recent study conducted by Liberty shows that education is one of the costliest investment a parent or a guardian will ever undertakes.
Importantly perhaps, the intention of such innovation (education policy) is much larger than just trying to out compete a like-minded industry player.
“There is a lot of emphasis going on about Vision 2040 and that is why we zeroed in on the education product,” Mr Almeida said in an interview last week.
He continued: “We saw that accessibility to savings for education and the country’s 2040 vision go hand in hand and if you do not have those two happening at the same time, then that means that driving Vision 2040 becomes the sole responsibility of the government and that is not what we want. We want it to be participatory with everybody playing their fitting role.”
Insurance penetration in the country is still pathetically low. This is something that even the industry is regulator is not ashamed of acknowledging.
However industry players as well as the regulator believes that innovation in the areas of social services such as education is no brainer in as far as boosting penetration which is currently at 0.7 per cent in Uganda.
“The penetration has actually gone backwards over the last two years instead of going forward,” Mr Almeida said.
He continued: “With the rollout of bancassurance we will see a lots of banks coming up with their own education savings plans all that will help in market penetration.”
Speaking as insurance industry analyst, Mr Almeida argues that rolling out of a national health insurance scheme will be a game changer.
“Definitely life will never be the same for the entire Insurance industry in the country,” he said when asked how critical the scheme is in deepening penetration of insurance uptake in the country.
At the moment it is only a section of working class that is accruing the benefits of the National Health Insurance Scheme. But going forward there is need for the government to work with the insurance companies to bring in the informal sector, which makes up nearly half of the economy, into national insurance health scheme.
Government involvement is important so as to leverage the cost. If this is not done then it is likely that the additional cost of offering the scheme will be on the shoulders of the working class yet it shouldn’t happen that way.
Distribution needs to be worked out as well for it plays a key part in deepening penetration. Not to be a conduit for money laundering, industry players such Mr Almeida believe that such insurance products do not end up being a channel for cleaning illicit money.
He said: “So anti-money laundering laws are becoming a major focus and we are going to try to work with all those involved and see how best we can make it easy to access savings without putting people doing business the right way through a lot of due diligence.”
Consumer awareness and transparency is crucial for it is at the heart of deepening penetration.