Driving the insurance sector upwards through increased awareness and improved customer service is key to success

Miriam Magala, CEO of the Uganda Insurers Association, talks about the challenges and opportunities facing the Uganda insurance market What are the five issues that will drive growth of the insurance industry in Uganda? Continued consumer education and awareness will remain at the core of what we do in order to spur growth. We believe that the more people understand about insurance and its benefits to their lives and business, the more appreciation they will have for our services, which will therefore increase penetration and grow our industry. Increased access to insurance services mainly through various technology options will also enable growth. The advances in technology are making it easier for us to reach more people today than we did five to ten years ago, through avenues such as mobile and the internet, and by taking advantage of these, we will see more appreciation of our services. Research will also play a critical role in spurring the growth of our sector as it will provide answers to the needs of the market and how, as the industry, we can meet these needs. Tied to all the above would be skilling the market and building our capacity to ensure that we have the necessary skills to continue providing and improving on the services we believe. It will also be critical that we continue to advocate for a positive regulatory and business environment. As a particularly price-sensitive industry, we are aware that changes in regulation and policy will have adverse effects on our performance. Our industry is still feeling the aftershocks of changes in the tax regime in 2013-2015, where stamp duty increased from UGX5,000 ($1.39) to UGX35,000 ($9.75) and value added tax (VAT) of 18% was imposed on insurance services, while withholding tax was applied to reinsurance services. The result was a decrease in our performance, especially as individual customers have been discouraged from purchasing our products. We will therefore continue to work with the government and its agencies to ensure that the industry encouraged to growth through positive policies. What are some of the policy and regulatory changes that the Uganda Insurers Association (UIA) is to recommend to the Minister of Finance? We are proposing a reduction on the tax burden that the insurance industry currently carries. We are currently the third most taxed sector and as we provide price-sensitive services, any changes adversely affect our performance. We are therefore proposing a reduction in stamp duty for motor third-party insurance and individual products, including agriculture insurance products and microinsurance. The removal of VAT on agriculture insurance and a reduction of withholding tax on reinsurance services to 5%. By doing this, growth will be encouraged and more importantly, our clients will continue to enjoy our services at affordable rates. Please tell us more about the oil and gas syndicate. Is there pooled capital? Who is the reinsurer? What capacity in value of risks does the syndicate have? The Oil and Gas Co-Insurance syndicate was established to ensure the industry‘s participation in underwriting of oil and gas risks within the country, including the presence of sufficient domestic capacity and expertise to underwrite oil and gas risks. The syndicate will operate on a co-insurance basis and 16 general companies will participate. The syndicate will use A-rated reinsurers as approved by the Insurance Regulatory Authority of Uganda (IRA) and there are pooled contributions by participating companies. The IRA approved the syndicate in 2016 and the syndicate is engaging with the oil and gas companies with the objective of ensuring that their requirements are appropriately met. What is your view of this statement: “The increase in the minimum paid-up capital required for insurance business operations restricts the entrance of new insurers to Uganda”? Uganda has one of the soundest regulatory environments and our regulator has taken the necessary steps to ensure that the insurance customer is protected and satisfied with the services that they enjoy all the time. That being said, the increase in minimum requirements should not restrict entrance but encourage insurers who wish to participate in a market that puts consumers’ needs first. There is a widely held belief that investing in public awareness will help to increase the number of insurance buyers. The challenge is the cost. How can the insurance industry in east Africa overcome this challenge of lacking enough money to roll out sustained public education? Public awareness and sustained public education is a situation that is not unique to insurance alone but to any number of especially service-based industries. That being said, one of the strategies we are adopting in the Ugandan market is pooling our resources together under umbrellas such as the UIA to streamline our education programmes and ensure more effective awareness. As a market, we have also developed a market growth and development plan, which should see our penetration grow from less than 1% to 3% during the next ten years. Key to this market plan is consumer awareness and education and therefore we have in-built strategies and activities that will be executed both by the Association and the industry to see our penetration increase. In addition to this, we have created partnerships with organisations such as Financial Sector Deepening Uganda, Uganda Investment Authority, Uganda Shippers Council and Uganda Police Force, to then be able to tap into the networks these organisations have access to. Through our partnerships, we are therefore able to educate more people across the country about insurance. Through this and other initiatives, as a region we should see a sustained approach to public education. What should east Africa do to increase penetration of microinsurance? Increase the level of awareness about insurance. We do know that there is an understanding of the word insurance but unfortunately, not many people appreciate this service. A result of this non-appreciation is the low level of penetration. By continually educating the public about insurance, the introduction of microinsurance will be easier. As a region, we need to look at our distribution models to ensure increased access to our products. This will certainly go a long way in ensuring the adoption of microinsurance products. Tied to distribution would be ensuring that our business and pricing models are correct for our markets. As insurers, we are in the business of paying claims and in relationships with clients over the long term. It is therefore imperative that as we develop our business and pricing models, whereas they should be attractive to the market, we should still be in position to pay claims when they do arise.

Driving the insurance sector upwards through increased awareness and improved customer service is key to success

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