Last month, Benon Oluka, a journalist with The Observer newspaper, penned an article to narrate his experience with Insurance Company of East Africa (ICEA), an insurance company, which had refused to compensate him as a third party after he was injured in a nasty accident in Kibaale District last year.
He was left nursing a broken upper left arm when their Land Cruiser Prado UAS 138Z veered off the road as the driver attempted to avoid a head on collision with a speeding Toyota Corona.
It took a costly surgical operation at Mengo Hospital to save him arm from amputation. Since the vehicle had comprehensive insurance cover, he thought that the insurance firm, which had insured the vehicle comprehensively, would compensate him as a third party victim. His hopes were brightened even more when he learnt that the vehicle owner Patrick Tumwine had been compensated by the insurer by repairing his vehicle.
However, the hopes vanished in thin air as the insurance firm told him off saying he was not entitled to any third party compensation. A series of articles and rebuttals ensued in the newspaper and online, prompting the intervention of the regulator, the Insurance Regulatory Authority-Uganda (IRA-U). After studying the situation and convening a meeting with the two parties, the regulator sided with Oluka and directed the insurer to fulfill their obligations to the victim by compensating him with Shs 5 million only.
However, the insurance firm has stuck to its guns on the grounds that the insured (Tumwine) ‘violated’ the terms of his policy. Needless to say, the saga has left a deep dent on the company’s public image, which will cost a lot more than Shs 5 million to repair.
Rhona Nuwakunda, the acting head of claims at ICEA, told The Independent in an interview that there’s a misconception amongst most insured people that a comprehensive policy covers them for all manner of risks and thus rarely take the time to read their policy documents to understand what is covered and what is not.
“In reality, there is no single insurance cover that will protect you from every imaginable risk. Every cover comes with its limitations and exclusions,” she said. “The private motor policy, for example, limits the use of the vehicle to social, domestic and pleasure purposes and for the insured’s business.”
She added, “For instance, if the vehicle in question was carrying his friends or relatives, they would have been compensated but in this case we are not obliged to do so because they violated the contract. She insisted that Oluka should seek compensation for a third party from the owner of the vehicle. However, the question as to how the insured was compensated when the insurer says he breached the terms of his policy remained unanswered.
Indeed, Oluka is not the only one who has suffered at the hands of insurance firms, and analysts say this behavior by the insurance industry is what is discouraging Ugandans from engaging in the insurance industry.
Mistrust, lack of professionalism hurting Uganda’s insurance industry
Statistics from the IRA’s Complaints Bureau show that complaints against the insurance companies doubled to 160 last year, exposing how insurance firms have over the years declined to pay claims owed to the insured, and consequently entrenching detestation the population has against insurance policies.
Indeed, Oluka’s story elicited a flurry of comments on social media with many of the readers expressing similar complaints about how they were unfairly denied compensation.
IRA-U says the increase in the number of complaints mainly centred on delayed payments of claims despite increased public awareness campaigns. Latest data from the IRA-U shows that Uganda’s insurance penetration still staggers at a mere 0.86% compared with 1% in Rwanda, 2.3% in Tanzania and 3.2% in Kenya.
A source within the insurance industry who didn’t want to be named, told The Independent that many times insurers don’t provide adequate information to the prospective clients on the circumstances under which the insured may not be compensated in the event of a risk.
“Insurance firms need to provide more information to the insured so that they very well understand the policies they are undertaking,” the source said, adding that insurance firms tend to hide critical information from the client for purposes of making a sale.
The source added that there has been a surge in cases of fraud in the industry, which has forced insurance firms to first scrutinise the extent of the risk prior to awarding compensations.
Though officials at IRA were reluctant to comment on the matter, The Independent understands that the regulator is getting back to the insurer to address the issue once again.
“IRA’s position still remains (that the insurer pays the insured) but further engagements are ongoing. Commenting at this time may be pre-mature,” said Protazio Sande, the assistant director of Market Research and Development at IRA-U. As the industry regulator, the IRA-U is keen to show leadership in a bid to re-assure the public that the industry operates in a well-regulated environment.
Faith Ekadu, an advocacy officer at the Uganda Insurers Association, said clients need to consistently read all the documentation carefully when they are signing their contracts to understand exactly what they are getting- especially in terms of what is covered, what isn’t, and what they should do when a loss occurs.
She said the industry is also currently developing systems to streamline the claim process leveraging on technological developments, which would considerably cut down on this process. By the end of last year, the country had 29 insurance companies, 29 insurance brokers, one re-insurance broker and 18 loss assessors. The market has recently attracted several international players, a development that is expected to inspire some more professionalism in the industry.