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Insurance premiums reach record high of Shs1.18trillion

Russia-Ukraine war could deter economic recovery leading to a rise in policy lapses and low new policy uptake and renewals

Kampala, Uganda | ISAAC KHISA | Uganda’s insurance industry has recorded a gross written premium growth of 10% for 2021, to Shs 1.18trillion driven by enhanced distribution, customer confidence, risk awareness and a growing middle class.

The record performance comes amidst the effects of the coronavirus pandemic and slowdown in economic activities.

Non-life insurance business recorded an increase in gross written premiums from Shs665billion in 2020 to Shs706billion last year, while life business increased from Shs324billion to Shs 391.7billion during the same period under review.

Comparatively, non-life insurance business contributed 59.8% to the aggregate industry written premiums, a 2.5 percentage points lower than the market share index of 62.4% in 2020.

On the other hand, life insurance business accounted for 33.2% of the gross written premiums, 2.8percentage points higher than the market index of 30.4% recorded in the previous year.

Ibrahim Kaddunabbi Lubega, the chief executive officer at the Insurance Regulatory Authority of Uganda (IRA) said the fast growth in life insurance business is a clear testament that the segment is reclaiming its rightful position.

“Indeed, in developed economies, life insurance tends to contribute more to the gross written premiums and I am happy that the segment here is growing faster to reclaim its right position,” he said.

The micro-insurance’s gross written premiums recorded a 21.4% growth to Shs600million signaling increased appetite for micro-insurance products covering the low-income earners.

Insurance business deals that passed through the banks popularly known as bancassurance also increased from Shs83.34billion to Shs103.54billion while insurance brokers saw gross written premiums increase from Shs 277billion to Shs309.3billion during the same period under review, signaling the significant contributions of the intermediaries in insurance distribution to the prospective customers.

Kaddubabbi said “brokers are critical players in the market as they play a critical role in providing expert, value-adding advice on risk management to their clients.  “An increase in their share in total premiums is a positive development,” he said.

Health Membership Organisations recorded sharp drop in gross written premiums from Shs 75.5billion to Shs 48.2billion due to acquisition of International Air Ambulance by Prudential insurance.  Insurance claims increased from Shs444.7billion to Shs564billion.

Meanwhile, insurance penetration increased from 0.77% in 2020 to 0.8% in 2021 and so is insurance density that increased from Shs 25,599 to Shs 28,059. Industry assets, too, recorded a 30% growth to Shs832.5billion signaling increasing capability to handle large insurable risks.

Mixed Outlook

Kaddunabbi said despite the concerns of rising inflation coupled with the contagion effect of Russia-Ukraine war that could deter the economic recovery and ultimately affecting insurance industry characterized by a likely rise in lapses as policyholders find it hard to sustain their premium remittances and low new policy uptake and renewals, there’s still hope for the insurance’s premium  growth.

He said there’s a likelihood of an increase in insurance premiums from marine insurance product as a result of enhanced compliance of compulsory local consumption of marine insurance that will be enforced in July this year.

He said the industry also hopes to record an increase in insurance premiums from the international travels and tourism activity now that the economies are fully opened up.

The insurers are also banking on statutory Motor Third Party Insurance resulting from integration of the Motor Third Party platform with the Express Penalty Scheme of Uganda Police which are under full implementation now.

“We also expect an increase in premiums from the anticipated investments in oil and gas sector,” he said, adding that there’s a likely increase in the uptake of   agriculture insurance following the government’s move to renew commitment to provide the premium subsidy until 2024/25.

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