Insurance body cracks whip

By Isaac Khisa

Insurers warn on IRA-U’s new guidelines on health insurance

Uganda’s move to introduce new guidelines in the medical segment of the insurance industry are likely to hurt the growth of Health Membership Organizations, as the country moves to streamline their operations. The new guidelines, which came into force effective Oct.01, are aimed at strengthening the financial positions of HMO’s to sustainably handle big insurance policies.

Officials in the insurance industry told The Independent that the new rules by the Insurance Regulatory Authority of Uganda, requiring HMO’s to have a minimum capital of Shs 20 million this year, Shs 250 million by 2016, and Shs 500 million by 2017, to be issued with  an operating licence, are likely to affect the operation of smaller players in the business segment.

The new guidelines also require at least 50% of the firms’ board of directors to be residing in the country, employ only one expatriate, and the firm’s chief commercial officers holding a recognized degree and minimum of five years demonstrated experience in HMO’s or medical facility management or a certified medical person with a recognized medical degree certified by Uganda Medical and Dentists Practitioners Council. Dr. Kato Sebbaale, the chief executive officer at the Case Medical Centre, said they are worried with the hurried implementation of the guidelines yet the segment still needs to be nurtured to grow. “The operation of MHO’s in the country has been healthy; we are only worried with the speed that IRA-U is taking to implement the new guidelines,” Dr. Sebbaale said.

“There are some HMO’s that are still young and needed time to grow. Implementing these guidelines could affect their operations, which is not good.” Dr. Ian Clarke, the executive director at the International Medical Group, said whereas the regulator has in the past three years gradually introduced more stringent financial and reporting standards for HMOs, some of the smaller players may not be able to meet these new requirements. “What IRA-U is proposing is a continued refinement of the standards, which they have been working on… While there are those in the industry who will not be happy, the new regulations are much more progressive for the operation of HMOs than in Kenya or the region,” Dr. Clarke said.

The country’s regulator insists that the new guidelines are meant to strengthen the country’s HMO’s to handle bigger policies and not to stifle their growth. “Since the coming into force of the Insurance Amendment Act 2011, we have been licencing HMO’s on soft grounds; we were not looking at issues like capital requirement because we wanted the segment to grow.  But we have been having challenges; some of them not paying claims as well as not following insurance practices,” IRA’s public relations officer, Mariam  Nalunkuuma, said.  Nalunkuuma said the new requirements are expected to strengthen HMO’s financial position to avoid their collapse as was the case with Micro-care Uganda in 2009. Micro-Care, the then country’s biggest health insurance company, was struck off the list of licensed insurance companies citing inability to meet industry requirements.  The company, that covered 70,000 people in a network of 157 health facilities across the country, faced a financial crisis in which over a dozen health service providers were demanding over Shs 2 billion in unpaid bills.

Mid this year, Africa Premier Insurance was struck off the list of licenced operators for inadequate capital. Data from IRA shows that whereas the insurance industry premiums grew 9% to Shs 504.8 billion in 2014 due to a combination of factors including taxes, slow growth in the economy ,  depreciation of the shilling by 12 percentage points, and low export volumes, the insurance penetration remained stagnant at 0.85%. In the East African region, Kenya remains the market leader with a penetration rate of 3.2% followed by Tanzania with 2.3% and Rwanda at 1%. During the same period, the insurance asset rose from Shs 638 billion  to Shs 750 billion, signifying a growing trend of companies capability to handle insurance risks. However, total premiums for HMO’s declined 17.8% from Shs 56 billion to Shsh46 billion as population shunned insurance products citing introduction of taxes on polices.

“We are also looking at increasing local content in the insurance sector; creating an enabling environment for transition in the management of these insurance firms to the locals,” Ms. Nalunkuuma said. The introduction of new regulations in the industry implies that smaller HMO’s with limited capital will in the next three years be forced to merge or look out for buyers as it has been with the demerger guidelines. The demerger guidelines, which were issued in 2013 by the IRA, require insurance firms to separate general and long-term business units as a move to align its insurance sector with the rest of the East African region sparked off a wave of buyouts of local firms to meet the capital requirements.

Last year, South African- based Sanlam Group acquired 78% stake in Niko Insurance whereas Old Mutual increased its stake to 60.7% in UAP insurance.  In June, the UK-based Prudential Insurance acquired Goldstar Life Assurance at undisclosed amount of money. Currently, Uganda has 12 HMOs, which include International Air Ambulance (IAA), AAR Health Services, Case Med Care Ltd, KADIC Health Foundation, and the Kampala International Medical Centre, among others.