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Embedded insurance a game changer to the industry

Augustus Nuwagaba and Mariam Nalunkuuma

Bancassurance has recorded Shs52bn for the three quarters of this year ending Sep.30

Kampala, Uganda | ISAAC KHISA | Embedded insurance model is turning out to be one of the most viable options of selling insurance services to customers as the country strives to increase insurance coverage and deepen penetration.

People familiar with the industry base their argument on the fact that insurance sold through commercial banks, popularly known as bancassurance, are recording a sharp growth in gross underwritten premiums, barely three years since banks were granted operating license in 2017.

Data from the industry regulator, Insurance Regulatory Authority of Uganda (IRA) shows that the premiums collected through bancassurance channels increased from Shs26bn in 2018 to Shs53.6bn last year. This accounted for 5.5% contribution to the total gross premiums of Shs973.58bn written that year.

For the three quarters of this year ending Sept.30, the gross premium written through banks amounted to Shs 52bn amidst the effects of the current coronavirus pandemic that has battered many economies around the world including Uganda. This represents a 6.36% of the quarter three 2020 industry gross written premiums of Shs818.7bn.

Mariam Nalunkuuma, the communication officer at the IRA told The Independent in an interview that the bank’s step to embed insurance in their banking products explains the surging gross written premiums through the banking industry.

Embedded insurance refers to a strategy that bundles coverage or protections within the purchase of a product, service or platform. That means that insurance product is not sold to the customer ad hoc, but is instead provided as a native feature.

“Currently, banks are embedding insurance to some of their products such as loans, mortgages, agriculture and property purchase, among others, across their networks to their customers,” Nalunkuuma said.

“In the process, the insurance companies are riding on the bank’s wider network and customer data base to distribute insurance products to customers which was not the case before.”

She said the practice of banks embedding insurance to some of their banking products has proved to be one of the most viable options in deepening insurance penetration.

This development comes at the time Uganda’s insurance penetration stands at merely 0.77% compared with 1.6% in Rwanda and 2.43% in Kenya.

Augustus Nuwagaba, an international consultant on economic transformation and a lecturer at Makerere University told The Independent that the success of embedding insurance policies in banks is a testament that executives in the insurance industry need to step out of their comfort zones and seek for partnerships with other businesses to grow their firms.

“Insurance companies need to partner with businesses such as supermarkets and electronic shops such that when one purchases a fridge or any other electronics, it is already insured. The beauty with this is that a customer gets two services at ago and therefore it is quicker, convenient and much secure,” he said.

“Otherwise, their traditional brick and mortar business model waiting for customers to walk in and buy insurance may not work.”

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