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One on One with Life Insurer’s Movers and Shakers

Although the insurance sector in Uganda continues to register impressive growth, it is widely agreed that a lot still needs to be done in order for it to reach its full potential and take its rightful place as a cornerstone of our economic growth and overall development.

Indeed, there is every cause for optimism, as under the aegis of the Insurance Regulatory Authority (IRA), a particularly foresighted corps of individuals is staking a claim to ensure the country reaps the full benefit of what the sector can provide. Armed with years of experience gained both here and abroad, they now also possess unique insights on what works, and what does not, when it comes to the business of insurance in Uganda.

‘The insurance industry is evolving to be more customer-centric, especially with local solutions for the local insurable interests of the population. This is a change from the past where most products were ‘imported’’, reveals Emmanuel Mwaka, the Chief Executive Officer of ICEA Life Assurance Company Limited. For long, these ‘imported’ products have generated attitudes of suspicion and mistrust amongst a confused and unwilling populace who only acquire the likes of Third-Party Insurance and Workmen’s Compensation in order to keep on the right side of the law. Rising levels of literacy have seen to it that although many might nowunderstand what those policies are, they are yet to be convinced of their need and efficacy in the environment they operate in. And can one blame them when, for illustration, it is conceded that even the Government itself has not fully adopted insuring its people and property.

Nicholas Lutakome, Acting Chief Executive Officer of Sanlam Life Insurance Uganda Limited, who just like Emmanuel has over a decade of experience in the sector, also attests to the fact that integrating local knowledge and attitudes has formed the basis for what is now an unreservedly positive outlook for growth. ‘The Ugandan society has nothing against insurance,’ he explains, ‘In fact, within our society we already actively practice insurance of some sort. Take the example of a death in a community: this triggersnatural generosity to raise financial support from well-wishers in solidarity with the bereaved.  These contributions are pooled together and handed to the bereaved and, in a way, serve to reduce the financial and emotional anguish caused by the loss of the loved one’. This is exactly how insurance works, the main difference being that, with insurance, contributions are pooled prior to the occurrence of the unfortunate event. ‘By acknowledging that many Ugandans understand insurance in very simple terms through their day to day responses to life circumstances, we are doing better at convincing them that it serves better as the buffer againstfuture unknown events that can lead to financial distress,’Nicholas adds.

One of the major moves in this direction was the demerger of Life and Non-Life Insurance, operationalized about 6 years ago. ‘There has been a special focus on insurance products that have the highest impact on society such as Life Insurance whose contribution for the total Gross Written Premium hastripled from about 10% to a few percentage points shy of 30% over the past 10 years,’ Nicholas reveals. 

And we are just getting started, for it is Nicholas’ belief that Life Insurance will eventually overtake Non-Life in terms of Gross Written Premium before 2030. This will be in line with the global trend which according to Swiss Re, Life Insurance premiums constitute 54% of the global insurance market’ This optimism has been bolstered by the effects of another major strategy- the introduction of bancassurance a few years back. ‘We arguably have the best bancassurance regulations in the region. And the initial results have shown that banks are keen on distributing Insurance Products to their customers, especially Life Products…  

And the industry figures clearly reveal that Ugandans, now possessed with better understanding of what insurance can do for them, are now looking beyond the perfunctory offerings like Third Party and Workmen’s Comp- the asset base has grown from 400 billion to about 1.6 trillion in the past 10 years, with Non-Life Insurance contributing about 70%, Life Insurance contributing about 28%, and the rest coming from Health Maintenance Organizations (HMOs). Of course, some might still consider this small in comparison to the banking sector, which has assets in excess of 30 trillion, but it is nonetheless remarkable progress.

As earlier mentioned, though, insurance can play a far greater role in providing a bulwark for Uganda to improve its development indices, from health to education to infrastructure and all. And today’s gains can only be built upon if the right decisions are made in regards to the sector, decisions, needless to say, where it would be wise to consider the input and leadership of the likes of Nicholas and Emmanuel, individuals with the experience and knowhow to seamlessly blend local sensibilities with international best practice.

One must start off with the fact that the importance of professionalism cannot be overestimated. ‘Ensuring that the support institutions such as the Insurance Training College are well equipped to provide education, training and professional development in the industry is a big step in the right direction,’ Emmanuel asserts.

It is with Nicholas’ earlier example in regards to the community assisting the bereaved to gather resources that both he and his colleague advocate the need for change in Uganda’s insurance sector: quite simply, it is necessary for people to be given an enabling environment to encourage them to pool their resources better.

‘Given the opportunity, I would promote long term investments by offering incentives for every Ugandan through avenues like tax waivers for those who invest regularly in long term assets like Life Insurance and Pension Funds’, Nicholas asserts. The amassed funds would create a reasonable pool for the economy to borrow locally, thus pushing the desired developments in infrastructure as well as private businesses.

Emmanuel divulges similar thoughts, ‘The tax regime for insurance needs to be relaxed to allow for it to grow without seeming unaffordable for the population. Taxes such as VAT should be minimized or suspended’. 

Also, Emmanuel adds, because life insurance typically encourages and grows the saving culture in the country, it is important that tax incentives for the population are created linked to the amount of life insurance an individual takes out. This can be in the form of deductibles for salaried earners before PAYE is computed. Eventually this will create the much-needed pool of funds that can be used by insurers in performing their investment functions, to finance public projects through purchase of government securities, Public Private Partnerships projects and the like.

As of now, though, there exists a stalemate. As Nicholas explains, ‘Currently the cost of borrowing is so high with annual interest rates in excess of 17%. This makes it hard for businesses to offer affordable services to the population, withmany choking on loans and eventually dying. The lack of funds further forces our government to borrow a lot externally to fund programs. This greatly reduces our forex reserves and continues the downward spiral by imposing catastrophic pressure on the taxable income for Ugandans’.

Adoption of the right policies will thus not only ensure that old age poverty is done away with, through the provision of pension and annuity products to the senior citizens, but will also produce enough resources to sustain our economy in the medium to long term.

We do have individuals who can guide us to that point. It isonly wise that they are given the opportunity.

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