Formal insurance uptake in Uganda stands at 1%, according to the FinScope survey conducted in 2018. Current insurance penetration in Uganda is also estimated at 1%, the survey adds.
The coming of Covid-19 has further compounded the miseries of the insurance sector in Uganda. According to the Insurance Regulatory Authority (IRA) report released in June 2020, the insurance industry, like other sectors, was battered by Covid-19. The insurance sector was greatly impacted in terms of asset risks, notably capital markets volatility, and weaker premium growth prospects. In the same vein, there are more customer pay-outs during the Covid-19 pandemic than ever. Insurance companies paid out Shs444.69 billion as claims in 2020, from Shs374.9 billion in 2019, the 2020 Uganda insurance industry performance report shows.
It is against this background that financial experts have advised that insurance companies must change their work methods if they are to survive in the post-Covid era.
Below are some of the survival tips given by experts.
Integrity and Empathy
Whereas Uganda’s insurance market is well-regulated with about 30 insurance companies, 35 insurance brokers and over 1,500 agents, FinScope 2018 found that formal insurance uptake is low, while informal insurance is on the rise. Nearly 40% Ugandans, including the salaried, instead rely on informal mechanisms to deal with risks.
According to the Insurance Regulatory Authority (IRA), the low levels of penetration in Uganda have been linked to, among others, the impression that insurers do not pay claims. This is a growing trends in Uganda, with some insurance firms being dragged to courts of law for refusal or late payment of claims.
Experts now say that this is the time for insurance firms to promptly pay claims and instil confidence in their clients.
Innovation and change
The situation surrounding COVID-19 also presents a unique opportunity for insurers to rethink and innovate as they adjust and respond to emerging issues after Covid-19.
Sande Protazio, the Director of Planning, Research and Market Development at IRA, warns insurers that they need to innovate or die. He emphasises a changing mindset and encourages industry to come along on the innovation journey so that, in a few years they can celebrate the fruits of their labour.
Experts say there may be a need for inventing new products that would be payable in the case of pandemics or epidemics. According to KMPG, products that are more similar to critical illness, which pay upon being diagnosed, could emerge as increasingly more popular around the world.
Insurance firms have also been urged to create usage based insurance (UBI) products – where the premiums payable are based on the extent to which a certain activity is performed. The simplest example is for motor insurance where, through telematics and data analysis, a customer would be charged according to the actual number of miles they drive rather than paying fixed premiums over time.
According to Laura J Hay, the global head of insurance at KPMG International, an audit firm, on average, insurers simply aren’t as close to their customers as organizations in other sectors which, by definition, have more frequent touch points or interactions. She says this is the time insurance companies show empathy to their customers, whose incomes have been battered by the pandemic.
She says now is the time for insurance companies to change their relations with customers and listen to their needs. Ms Hay explains that since Covid-19 has disrupted the work operations, it is time, for instance, insurance companies to start designing special packages for car owners who no longer drive frequently, and those working from home.
Globally, insurers have been perceived as slow to evolve and embrace innovation. But the coronavirus pandemic is flipping the narrative, as some insurers rapidly innovate to help consumers manage risks and protect against losses. One of the notable features of the situation has been the great boom in online communication between people, including via video.
Experts say insurers need to further strengthen their application of technology and data, effectively integrate technology and business, and improve the accessibility of online channels.
However, there is optimism in Uganda after seven insurance companies, including UAP Old Mutual, Jubilee, Liberty, Sanlam, Prudential, GA Uganda, Insurance Company of East Africa and AAR, in 2020 rolled out telehealth services, allowing the partnering health care provider, Rocket Health Clinic, to bill them for services rendered to their clients via mobile phones. The services rendered here includes; patients’ access to medical doctors 24/7 via toll free phone calls or WhatsApp for consultation, patients sample collection from their preferred locations for laboratory tests and medicines delivery within Kampala.
In Rwanda, the digital health service company, Babyl, is leveraging artificial intelligence and mobile technology to better assess individual risk (one of the major trends in insurance technology – InsureTech), increasing the uptake of Rwanda’s recently passed universal health insurance scheme. With two million people registered, the service is accessible over both smart and feature phones. It allows customers to make telephone consultations and receive recommendations on whether they should go to the clinic, helping reduce the anxiety of making an unnecessary trip to the clinic.
Mergers and partnerships
The insurance sector in Uganda has been urged to form partnerships and mergers to cut costs and ensure business continuity in the post-covid era.
Ibrahim Kaddunabbi Lubega, the chief executive at IRA, says mergers and acquisitions breed healthy competition and bring about customer-centric innovations and improved service delivery which in turn results in greater insurance penetration and more people being protected.
“…as such, I would like to take this opportunity to encourage the adoption of digitally led insurance services delivery in Uganda, cultivate a hunger for continued innovation in products so as to set industry trends locally and in the region,” he says.
One such company to take this route is Prudential Life Assurance Uganda Ltd, which entered the Ugandan market in 2015 through the acquisition of Goldstar Life Assurance, and has since recorded faster growth in market share and gross underwritten premiums. The acquisition of IAA, the market leader in the HMO’s business segment, with a gross underwritten premiums of Shs 32bn in 2019 now places Prudential Assurance at the top of the country’s nine life insurers, with a combined gross underwritten premium of more than Shs68bn.
Raising insurance awareness
Insurance penetration in Uganda remains below the 1% compared to Kenya’s 2.83%, Lesotho 4.7% and South Africa’s 16.9%. Many Ugandans still perceive insurance as very expensive, a service for the few rich individuals, a luxury, and an investment among other notions. In the past, low-income individuals have felt that they cannot afford premiums or fees because they lack regular jobs, or because they cannot read or write and as such, have not embraced insurance services.
Experts say given that COVID-19 has raised people’s concerns about health and risks, the industry should take this chance to further educate the market. It’s time to promote mainstream health management and insurance knowledge, and raise national insurance awareness, they say.
Mr Solomon Lubondo, the Uganda Brokers Association chairperson, tasks insurers to transition from the corporate clients to target small scale businesses.