INTERVIEW: Uganda’s Insurance industry’s future outlook shows growth
Ibrahim Kaddunabi Lubega is the chief executive officer of the Insurance Regulatory Authority of Uganda (IRA-U). He spoke to Isaac Khisa about their operations and the pertinent issues in insurance industry:
What is your leadership philosophy as a CEO?
My leadership philosophy is a participatory one through enhancing latent potential that resides in teams.
What is your assessment of the insurance industry currently?
I can say that the market is responsive depending on the products we roll out and so far the response is good. I remember at some point, we were 0.65% but we eventually went up to 0.85% penetration level, giving us confidence that we have started producing products that touch on the needs of the people. For instance, policies like agriculture insurance impact on the ordinary person and the farmers in particular.
It is two years since the IRA-U was created to be an industry regulator. What difference has it made so far?
The authority’s core mandate hinges on the protection of the policy holders and insurance beneficiaries. Driven by this mandate, I am glad to note that we have provided the regulatory environment and enforced maximum compliance. Corrective measures have been required to be undertaken by the licensees whenever need has arisen. We established a Complaints Bureau aimed at providing a dispute resolution platform to the insuring public to bring confidence in the industry. Since the creation of IRA-U, we have created a department in the regulators office, which deals with market development, research and related issues. This has helped us do some studies that have helped us in policy making. So, as we come up with policy directions, they are no longer driven by our thinking but by what the market really thinks. Consequently, between 2011 and now, premiums have more than doubled. We also guide insurance players to focus on products that address the needs of the people. This has also helped in deepening penetration. We have also seen an increase in awareness as well as increased professionalism in the industry.
Yes, but insurance penetration in Uganda is still low compared to our peers in the East African Community?
Penetration is strongly related to economic growth. So, low penetration for Uganda (currently less than 1%) is not accidental. However, there are other factors including low awareness in terms of limited knowledge on insurance products and limited availability of suitable products. Many of our people including policy makers – legislators, executives, and various ministries are not aware of the benefits of insurance. The low saving culture coupled with low levels of disposable incomes for the majority of the population limits the uptake of insurance services especially life assurance. In addition, enforcement of mandatory insurance such as Motor Third Party (MTP), Workers Compensation insurance and Marine Insurance-with respect to the requirements of local content, affects penetration levels due to some legislative and administrative challenges. Tackling these decisively forms the core agenda for the coming period. The Authority is currently working with Uganda Revenue Authority to develop software to allow payments of MTP via a mobile phone platform so as to increase on compliance. But also, delayed passing of the National Insurance Act has also played a role in the low insurance penetration in the country.
What strategies are you employing or plan to employ to change this situation?
We are developing a unique strategy to focus on promoting and stimulating demand for insurance products. We are working on a National Insurance Policy to provide a framework for a responsive risk management especially with the planned National Health Insurance Scheme (NHIS). We are also closely working with government bodies especially autonomous and semi-autonomous ones, which are now starting to embrace insurance. We are also in discussions with the government about the importance of insuring its properties and assets. Currently, many of the government assets are not insured yet it would boost the insurance industry and generally the economy since government is the biggest spender. We are also working with the government to ensure that there’s implementation of compulsory policies such as workers compensation and ensuring that policies that touch on the ordinary person such as NHIS come on board. Currently, our neighbours (Kenya, Rwanda and Tanzania) have national health insurance schemes and I am happy to say that the finance ministry has now issued a certificate of financial implications to the proposed National Health Insurance Bill. We have also continued to overhaul and amend our laws to meet the needs of the public and also to be in line with international best practices.
To what extent is the situation whereby the government is not a player as a consumer of insurance services a problem to the growth of the industry? Government is major player in our economy both as a consumer and a producer. Insurance facilitates consumption and production and as such would benefit greatly from adequate insurance uptake by government. We have engaged the government several times and we have noted a significant change as we are now frequently called upon to provide insurance-related advice. We have succeeded in convincing a section of semi-autonomous entities –Bank of Uganda, Kampala Capital City Authority, and National Drug Authority, Civil Aviation Authority and others- to insure their properties. Now almost 90% of them are being insured and that is a very big boost to our economy. We have also had discussions with Uganda National Roads Authority, Public Procurement and Disposal of assets Authority, and BoU to see that instead of accessing local contractors by demanding bank guarantees, they can now start demanding for insurance guarantees. This will not only reduce the costs of doing business but also boost local contractors. Our hope is that if all these bodies come on board, we definitely expect that insurance penetration will grow by not less than 3%.
The issue of public discontent about getting paid by insurers keeps coming up and appears to be a big disabler. Why does it continue to be a problem in the industry?
That has to continue because whereas payments are made, there are also some claims that are not payable. And definitely if an insurance company doesn’t pay one claim it doesn’t mean that the industry doesn’t pay. It has been unfortunate. However, what is critical is fairness. We encourage fairness. That explains the creation of a complaints bureau at IRA-Uganda. The bureau allows an aggrieved person or party to come to us and complain because if that person does not have a way to redress the satisfaction, they can believe that may be all claims are never paid. So, this kind of involvement to resolve issues between two or more parties is internationally acceptable and in some countries, they do have ombudsmen who are also specialised in insurance. For us, we are still doing a complaints bureau and will eventually graduate to ombudsman.
What is the procedure for dealing with insurers who are unwilling to pay up the claims?
Whoever is not happy with the way he or she has been treated with by the insurer normally writes a formal complaint to IRA-Uganda. The regulator, then, invites both parties – the complainant and the defendant – to hear the story of both sides, and we eventually make a decision in writing. If the decision is that the insurance company must pay, we tell them to do so. Sometimes, we have even gone further to give the timelines in which the insurance company should pay up.
A section of insurers claim the growing incidence of fraud is as a result of a weak regulator. What is your comment on that?
Weakness is subjective. For us as the regulator, we are able to handle whatever is there for now. In spite of that, fraud also happens to be in sophisticated countries. What we need to do is study the fraud tendencies which are done in developing countries like Uganda and address them. For that, the regulator needs to play its part and so do the other players in the industry including the insuring public so that comprehensively, we can address the vice.
Three years ago, a consortium of six insurance companies led by Lion Assurance unveiled Kungula Agrinsurance policy. What is your assessment of the performance of this product?
Definitely as a new product on the market, the insurance firms have had some hitches here and there but they are positive. The performance in terms of uptake has been low due to market and institutional challenges that have impacted on the prices. However, with the government commitment of Shs5 billion premium subsidy, the uptake is likely to improve. It is important that this product is not lost because more than 70% of our population is involved in subsistence agriculture.
Uganda will host the 44th African Insurance Organisation Conference next year. What outcomes should the country and the insurance industry expect from the event?
Hosting the AIO will come with numerous benefits including raising Uganda’s profile among regional insurance players, and thus enhancing recognition within the continent and the international community. The conference will also enhance networking, providing an on-going forum for benchmarking, discussions on country-specific challenges, and design of work strategies. Most importantly again, it will be used to highlight the opportunities for investment that are available from the insurance perspective and other sectors in Uganda. This is because more than 1,000 delegates will come from various parts of the world.
Going forward, what opportunities do you see for the industry?
The opportunities are many and promising. With the creation of oil and gas pool and getting ready for big infrastructural projects, the insurance industry is a good avenue to invest. The proposed amendment of the regulatory frameworks – Insurance Act, Motor Third Party – and developing of the National Insurance Policy and the proposed Financial Institutions Act for providing of banc assurance will stir the growth in the industry in the coming years. And given that our penetration is still low means that one can make huge profits in investing in the insurance industry. I am also seeing the industry regaining its rightful position in the future. Insurance is supposed to be ahead of banking in developed economies and that is what we should be yearning for. Insurance should be a source of income for many of the population via job creation. Five years ago, we had about 600 and now have more than doubled to 1, 500 jobs. Our target is much high than that.
Where do you see the industry in the next five years?
I am hoping that in the next five years, the public will be confident that insurance is the best risk mitigator, and that there will be no medium to big project that will be uninsured. Secondly, I am also hoping that in the few years to come, we will have micro-insurance policies which touch the ordinary person and the contribution of life insurance segment will be almost 50% of the gross premium underwritten. I also expect that the regulator should also have more visibility both in infrastructure development and in job creation.