By Samuel Sanya
Humphrey Wanyama is an engineer. Though his earnings have barely improved since he was single and unattached, Wanyama now has to split his earnings between himself, his wife and his 10 children.
According to the Uganda Bureau of Statistics Household Survey data for the year 2005/2006, each women has as many as 7 children in her life time and monthly average earnings are at sh170,000.
Though incomes have gradually improved over the recent years, a significant number of Ugandans, especially those employed in the informal sector share Wanyama’s story.
Cognisant of this reality, the Uganda Association of Insurers (UIA) and the Uganda Retirement Benefits Regulatory Authority (URBRA) have joined hands to create low cost financial products that will provide a form of investment and saving.
“Our biggest impediment to growth is the lack of financial products that offer wealth enhancement. There are practically no products that target the low income segments where people save sh5,000 per month,” Joseph Almeida, the Liberty Life Assurance boss said.
Almeida doubles as the chairman of the Life Assurance Committee of the Uganda Insurers Association. He made the comments at the 4th Annual UIA life agent of the year award.
Almeida noted that all life insurance policies have to be affordable to the low income Ugandans and that the policies must include an element of savings at the same time.
Sanlam Life Insurance’s Amos Osunu, won the life insurance agent of the year accolade. Miriam Magala, the UIA chief executive officer noted that agents have played a significant role in growing industry premium collections.
The insurance sector recently launched a micro insurance product for the health, disability and funeral cover for a family of six children for as low as sh121,000 annually, more such products are set to be rolled out.
Deepak Pandey, the UIA chairman noted that the government should provide a tax incentive on savings products like is done internationally, he added that insurance sector premiums will benefit from uplift in savings.
Uganda’s savings culture remains low at about 1.5% (sh750b) to the GDP at market price when compared to China 38%, India 34.7%, and Turkey 19.5%.
“We need insurance agents to be truthful and explain insurance products properly to all Ugandans they sell to. They should only promise what they can deliver; this will increase confidence in the sector,” Pandey said.
Turning to the Pensions sector, Pandey noted that the soon-to-be passed Uganda Retirement Benefits Liberalization Bill should create a level playing field for all pensions sector firm and that it should subject insurance firms to double regulation.
“The Pensions law should be flexible enough to be adjusted to meet the ever changing market needs. The URBRA should have a training institute to develop key technical capacity to run the pensions sector efficiently,” Almeida said.
There are close to 18 million working Ugandans but only 0.5million that are in the formal sector are covered by the National Social Security Fund (NSSF), liberalization of the sector is expected to open the way for creative new players to cover the informal sector.
In turn, insurance sector penetration is a dismal 0.66% of the GDP, necessitating new approaches like the use of local languages, mass public education and innovative premium collection methods to grow sector penetration.
A collaboration between the insurance and pensions sector will have mutual benefits for both sectors.
Andrew Kasirye, the URBRA chairman noted that the pensions and insurance sector had the key responsibility of deepening the financial sector through reaching out to Uganda’s vast youth population under 30 years.
More than 70% of Uganda’s population is under 30 years. “A lot of insurance products complement the pensions sector. Collaboration between the two sectors is absolutely critical,” Kasirye said.
Moses Bekabye, the acting URBRA managing director noted that the new pensions and retirement benefits liberalization bill seeks not just to bring in new players but to reform the entire sector to grow public confidence.
“It is hard to sustain economic growth using borrowed funds. When the Pensions sector is reformed to allow even Ugandans in the informal to save, we will have a larger pool of private capital to fund development like the Asian Tigers did in the past,” he said.