IRA Chief Executive Officer, Ibrahim Kaddunabbi Lubega
The insurance industry has declared the direct effects of the COVID-19 pandemic on the business behind them, following sustained growth in premiums raises and claims paid.
According to the figures, the industry remained on a positive growth path in 2022, with Gross Written Premium (GWP) growing to 1.425 trillion in 2022 from 1.183 trillion Shillings registered in 2021. This 20.4 per cent growth is almost double the rate at which the premiums grew in 2021 at 10.61 per cent and the 2020 growth of 9.34 per cent.
However, the Insurance Regulatory Authority (IRA) is uncomfortable that the sector is still largely dependent on the performance of non-life insurance, which mostly deals in short-term products. Of the 1.425 trillion Shillings, 818.7 billion went to insure non-life businesses, representing a market share of 57.7 per cent.
Non-life insurance covers property, businesses and individuals against losses. On the other hand, Life Insurance guarantees that the insurer pays a sum of money to one or more named beneficiaries when the insured person dies in exchange for premiums paid by the policyholder during their lifetime.
IRA Chief Executive Officer, Ibrahim Kaddunabbi Lubega says however, that there was a growth in the shares of the other segments, meaning that more money will be generated from long-term insurance policies, which also boosts the availability of long-term capital in the economy.
The life insurance business itself generated 485.8 billion Shillings in GWP in 2022, up from 397 billion registered in 2021, and its market share grew slightly to 34.1 per cent. The highest growth was recorded in Specialised Health Insurance, where premiums jumped from 31 billion Shillings to 81.4 billion Shillings.
However, Health Membership Organisations saw a decline in premiums written mainly because of the suspension of International Medical Link’s license by IRA leaving only two operational. Haji Lubega also says there were some losses of clients by some Health Membership Organisations to Health Insurers, hence further affecting the businesses.
Bernard Obel, the Director of Supervision at IRA, explains that International Medical Link’s failed to fulfil some obligations, especially regarding its financial strength among others, leading to its suspension in September last year and subsequently ceasing offering the services.
There was also a decline in business under the micro-insurance services, which largely serve low-income earners, with some products allowing one to deposit as little as 1,500 Shillings at a time. Gross premiums written under this amounted to 611 million, down from 657 million Shillings, the decline being attributed to harsh economic conditions that mainly affected the lower earners.
This, according to the CEO is one of the main challenges because the low-income earners need insurance more than the richer communities, the reason the insurance companies are being encouraged to innovate in low-cost products and making transaction costs lower.
These developments led to a growth in market penetration, a measure of the sector’s contribution to the country’s GDP, from 0.796 in 2021 to 0.876 per cent last year.
According to IRA, this would be higher but for the rebasing of the economy in 2019 which meant that the value of the insurance industry is now being weighed against an expanded total size of the economy.
As of the end of 2022, more than 2.475 million Ugandan individuals and corporates were covered in one way or another, meaning that 4.5 per cent of the population had a form of insurance. It also means that on average, every Uganda is now insured to a total of 31,315 shillings, up from 28,059 Shillings in 2021.
During the year, a total of 618.7 billion was paid out to successful claimants, compared to 564.8 that was paid out in 2021. The IRA was particularly excited at the performance of agriculture insurance which is subsidized by the government, where 374 billion shillings was insured.
By the end of the year, according to records, some 665,000 farmers were insured to a cumulative total premium of 2.2 trillion Shillings. Over the year, 11.4 billion Shillings were collected in gross written premiums while 8.8 billion Shillings were paid out to farmers who incurred losses in different forms.
Kaddunabbi said they are urging the government to increase the subsidy from the current annual five billion Shillings so that the farmers can insure their crops throughout the year.
The regulator also assured that the insurance of the oil and gas industry is right on track, with the consortium of the local insurance companies being able to underwrite the operations in the sector.
Obel says the Insurance Consortium of Oil and Gas in Uganda, ICOGU all but one company are involved.
Britam Insurance last year withdrew from the consortium after its main financier expressed discomfort about the environmental, social and governance issues raised by mainly NGOs on the oil and gas activities.
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