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Educate customers, pay claims to stir insurance uptake

Protazio Sande and Olli-Pekka Ruuskanen

However, the industry has recorded growth in premiums

Kampala, Uganda | ISAAC KHISA | It is no secret that the concept of insurance is pretty simple. In the exchange for a premium, an insurance firm agrees to compensate a policy holder for a specified loss, damage, illness, or death caused by an unexpected event.

So, as an industry that is centered on helping consumers better mitigate risks, why does insurance get such a bad view which hinders its faster growth?  The answer is more education and claims settlement.

Protazio Sande, the director for research and market development at the Insurance Regulatory Authority of Uganda said during the first ever international insurance conference held in Kampala on Oct. 17, that the industry has to educate prospective customers prior to selling them their products so that they purchase their preferred products based on informed decisions.

He said that educating customers minimises incidences of insurance firms claiming that their customers did not understand their obligations and thus deny them compensation when loss occurs.

“If we continue doing the same thing and expect different results, then, definitely, there’s something wrong with that. We must do things differently,” he said.

“We need to be innovative along the entire insurance value chain – from product development to claims payment.”

“The customers that the industry is dealing with are not interested in listening to anything else except fast claims payment,” he added.

He said insurance firms, on some occasions, need to look for a bigger picture in the process of compensating customers to protect the image of the industry.

He added that the industry, indeed, faces challenges of fraud but the players have taken advantage of it to deny a section of customer’s genuine compensation.

“So, we need to strike a balance such that we do not ruin the industry’s image,” he said.

“Let us all educate our customers about insurance as well as our existing and new products so that the industry is not seen as merely interested in selling its products but extending excellent services to prospective clients.”

In addition, Sande said, coming up with various innovations such as micro insurance and tech-enabled insurance products without educating the masses on how to go about it will not boost the country’s insurance penetration.

Uganda’s insurance penetration currently stands at less than 1% -the lowest in the East African region. Kenya’s stands at 2.85% compared with Tanzania’s and Rwanda’s 2.3% and 1%, respectively.

Surging premiums

This development comes as data from the latest Fincope Survey released last year shows that the people holding any sort of insurance policy stands at merely 220,000. This is far below the 350,000 customers who held an insurance policy in 2013, according to the Fincope Survey.

However, Uganda’s insurance industry premium growth has continued to surge. Statistics from the Insurance Regulatory Authority of Uganda shows that the industry recorded a 17.5% growth in gross underwritten premiums to Shs856bn in 2018 owed to the country’s investment in various infrastructure services such as hydro-electric power dams, revival of Uganda Airlines, installation of CCTV in Kampala and  upgrading of Entebbe International Airport.

Of this, non-life insurance companies recorded a 12% growth in premiums to Shs569.9bn while life insurance business recorded a 28.6% growth in premiums to Shs216.9bn.

Health Membership Organisations that includes, among others, Case Medical Clinics, International Air Ambulance and AAR recorded a 31% growth to Shs69.1bn during the same period under review.

The insurers net asset base increased by 11% from Shs458bn in 2017 to Shs508bn in 2018 signaling a growing strength of companies to handle more insurance risks locally as well as provide adequate protection to the insuring public.

The claims payment, which is the core value that the insurance industry offers to the policy holders and beneficiaries, increased by 11.9% to Shs326.7bn.

Saul Sseremba, the chief executive officer at the Insurance Institute of Uganda said that the low level of education and mistrust has continued to hamper growth of the country’s insurance industry.

“The industry has to put in more effort to change this trend,” he said.

Olli-Pekka Ruuskanen, the research manager and adjunct professor at the Pellervo Economic Research, Finland, said lack of financial literacy especially in insurance is a major barrier for the sector’s growth.

He said numerous research indicates that attitude and behavior influences people’s decision to purchase insurance services.

“Attitudes reflect trust,” he said, adding that financial literacy does not mean that consumers buy unsuitable products.

He said that industry digitalization, product development, marketing, distribution, new business underwriting and claims settlement alone cannot fix the sector’s problems.

This is because internet is still expensive and fail, artificial intelligence’s domain surprisingly small and block chain is still resource intensive and slow, Ruuskanen added.

The conference attracted about 200 delegates. Themed ‘The role of inclusive insurance in delivering social protection agenda,’ the conference discussed various ways of how to stir insurance uptake including the use of ICT, and offers on micro-insurance and national health insurance schemes.

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