In Uganda, there is a pressing need for greater adoption of motor insurance, as revealed by data from the Insurance Regulatory Authority (IRA).
Out of a potential 1.7 million insurable motor vehicles, only 452,954 units were insured in 2022, leaving a staggering 67.7 percent of vehicles on Ugandan roads without valid insurance coverage.
The significant non-compliance can be attributed to weak enforcement measures and limited resources for monitoring and penalizing non-compliant vehicle owners.
Enforcing insurance requirements is especially challenging in certain areas. However, there has been a slight improvement, with compliance increasing to 32.3 percent due to digitization of motor third-party payments and better enforcement through the integration of systems with the Uganda Traffic Police’s express penalty tickets (EPS) register.
Motor third-party insurance is mandatory for all vehicles but faces low compliance rates.
According to IRA data, 85 percent of vehicles have motor third-party policies, while only 15 percent have motor comprehensive insurance, which provides broader coverage. A study conducted by IRA for the period between 2015 and 2020 showed that although motor third-party insurance has grown over time, non-compliance remains high. In 2020, compliance stood at just 26 percent, resulting in significant revenue losses for both IRA and the government.
The low compliance has cost the government an estimated Shs42.3 billion, with a significant portion due to Stamp Duty, while the insurance sector lost an estimated Shs39 billion in written premiums.
Additionally, there are indirect losses to the government in terms of corporation taxes and job creation, as the government continues to bear the burden of covering medical expenses for victims of accidents involving uninsured vehicles.
Despite some growth in the number of motor third-party insurance policies, the study noted that more than one million vehicles on the roads are without proper insurance coverage, even though the traffic department of the police disputes this statistic, claiming to actively enforce compliance.
As of June 2020, Uganda had a total of 2.3 million motor vehicles, with about 10,000 being written off and 750,000 exempt from insurance. Motor vehicle insurance is a popular class of insurance in Uganda, generating more than Shs170 billion in written premiums, a significant increase from Shs69.8 billion in 2015.
To address this issue, IRA and other stakeholders are working on amending laws related to motor insurance to raise compensation limits and promote voluntary compliance.
They are also considering the provision of digital stickers to deter the use of forged stickers and are looking to enhance penalties and sanctions against non-compliant motorists.