Kampala, Uganda | THE INDEPENDENT | More Ugandans are buying insurance through their banks as the channels have boosted confidence in insurance, players have said.
Official figures show an upward curve of insurance products through banks, which is technically known as bancassurance. It started in Uganda in 2017 after the amendment of the Financial Institutions Act, 2016 to allow banks to act as insurance agents.
According to the Insurance Regulatory Authority (IRA), the industry regulator, premiums collected through bancassurance channels raised from 26 billion Shillings in 2018 to 53.6 billion Shillings in 2019. This accounted for 5.5 percent contribution to the total premiums written in the year.
Aggrey Mulumbi, a chartered insurer said the interaction between the customer and the bank was high. The banks, he said, also know the customers’ financial ability and can tailor products to them. As a result, more people are buying insurance products through banks.
Through the banks, Mulumbi said, insurance companies are benefiting from efficiency in the banks and the benefit of constant interaction of customers with the bank.
This, he said will help build the confidence and long term relationship of customers in the banking sector to take on insurance. Also, the brand of the bank would be important for the insurers to lure customers to their side. Mulumbi was speaking in an online meeting organized by Centenary bank on bancassurance.
He added that banks needed to improve on credit life insurance, where they can embed certain products of insurance when lending to different customers.
While it is growing in popularity, bancassurance may come with risks. As some customers start buying insurance through banks, some agents are trying to sell everything to them which is leading to duplication, said Bashabe Simon, a business development manager at Niko Insurance.
IRA says insurance uptake penetration in the country reduced from 0.8 percent in 2018 to 0.77 percent in 2019. The decline is as a result of rebasing of the 2018/19 GDP figures that saw the size of the economy (GDP) expand from 109.9 trillion shilling to 122.7 trillion shillings.
However, the authority says to grow the sector, customer confidence is key. This can be achieved through quick resolution of disputes and payment of claims. Another part would widen reach where banks come in handy.