Uganda’s bancassurance premiums reach record high despite fraud concerns
Uganda’s bancassurance premiums hit an all-time high of $22.2 million in the second quarter of 2023, defying concerns over rampant fraud in the insurance industry that had been driving away potential and existing policyholders.
The sector’s robust performance is attributed to a remarkable 34.53% growth in bancassurance gross written premiums from $16.5 million in the first quarter ending March 31.
Banks have played a pivotal role in driving this growth by actively promoting both life and general insurance cover.
Year-on-year figures indicate that the industry’s gross written premiums surged from Ush711.6 billion ($18.95 million) to Ush828.9 billion ($22.5 million) in the twelve months ending June, showcasing the resilience and potential within the Ugandan insurance sector.
It is noteworthy that bancassurance premiums accounted for a substantial 31.1% of the total premium underwritten during this period, underscoring the sector’s growing influence and contribution to the insurance landscape.
While bancassurance’s surge is undoubtedly a positive sign for the industry, the Insurance Regulatory Authority (IRA) Chief Executive, Kaddunabbi Ibrahim Lubega, emphasizes that brokers continue to play a critical role in driving insurance coverage. Brokers offer valuable expertise in risk management, and their role in educating and advising clients cannot be overstated.
Therefore, they must actively communicate their value propositions to the public to further expand their market share.
Despite this positive trend, there is growing concern within the industry that the recent boost in insurance coverage, driven in part by government-subsidized costs, may start to wane. The government has been supporting smallholders with insurance coverage to increase their resilience against weather and climate-related shocks such as drought and extreme rainfall events.
Under the Uganda Agricultural Insurance Scheme, insurance coverage has been extended to 150,000 farmers. However, industry insiders fear that this subsidized coverage might be unsustainable, given the increasing strain on resources. Current projections suggest that an annual increase of at least Ush15 billion is required to accommodate more farmers under this scheme.
Medical insurance, constituting about 20% of the industry’s overall gross written premiums, has become increasingly popular among organizations. Although it represents 95% of all registered health insurance businesses, there is a notable lack of individual policyholders due to high costs.
The issue of fraud, which has plagued the industry, is also showing signs of improvement. In 2022, a total of 15 suspected fraud cases were reported across all segments. Forgeries topped the list of fraudulent activities, followed closely by issuing false documents, suppression of premiums, operating insurance businesses without a license, issuing false information, and leaking sensitive data. However, a significant reduction of approximately 92% was observed in the total value of these fraud cases in 2022, dropping from Ush11.23 billion ($3 million) in 2021 to Ush894.2 million ($238,453).
In conclusion, Uganda’s insurance industry is experiencing a surge in bancassurance premiums and robust performance, indicating the sector’s resilience and potential for future growth.
