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Insurance watchdog faulted on functions

By Vision Reporter

Added 15th November 2010 03:00 AM

THE Uganda Insurance Commission (UIC) has been accused of making no effort to close operational gaps that are affecting its regulatory role.

By David Ssempijja

THE Uganda Insurance Commission (UIC) has been accused of making no effort to close operational gaps that are affecting its regulatory role.

The commission was established by an Act of Parliament in 1996 to supervise and regulate the operations of the insurance industry.

It also licenses insurance companies, risk managers, loss assessors and adjusters, insurance surveyors and claims agents, as well as sensitising the public about the insurance sector.

However, the May 2008 report by Inspector Andrew Sewankambo, which New Vision has seen, noted that since its inception, the commission has completely de-linked itself from the public.

“The commission is run like an outdated parastatal. It lacks business approaches like those adopted by other sister regulator organisations,” Sewankambo said in a July 8, 2008 memo. Sewankambo had worked for the commission, but later left. The report detailed serious loopholes that required quick response, but many of them have not been addressed to date.

UIC, for instance, has not established a public library and does not have an archive, yet it is expected to be the main custodian of information about the insurance sector.

Uganda’s insurance sector suffers from low levels of penetration, partly blamed on lack of awareness, the report indicated, adding that UIC does not have even a single platform to educate consumers like other statutory bodies like the Uganda Investment Authority.

“We should urgently allocate funding to this cause, set up a consumer education desk, solicit funding for education and consult organisations that have successfully promoted consumer awareness campaigns,” Sewankambo recommended.

“Awareness gaps cannot be blamed on the commission alone. Every organisation in the financial sector is expected to run financial literacy programmes, but for us, we have not yet reached the required levels,” said Elias Kasozi, the commission’s board chairman.

The commission sells annual reports at sh50,000 per copy, but this is limiting its efforts to deepen penetration and understanding of the industry, sector players said.

They added that information about the industry be accessed free of charge because “turning the public body into a profit-making enterprise derails it from its mandate of providing relevant information to the people.

“The Government gives us inadequate funds, which cannot cater for all the costs. That is why we are forced to sell those annual reports to cover some of them. But this is among the critical gaps we intend to address soon,” Kasozi explained.

Although the market reports are supposed to be annual, they come out once in two years. The 2007 report was produced in March 2009, while that for 2008 came out in May this year.

But the Insurance Commission of Kenya, which handles 60 insurance firms and a tens of brokerage firms, produces market reports in time. UIC handles just 21 insurance firms and 21 brokerage firms.

Although Uganda’s insurance sector registered strong growth last year, it is still one of the least developed in Africa at mere 0.59% penetration rate.

The sector’s contribution to the country’s GDP remains 1%, while the industry’s penetration rate has been between 0.57% and 0.59% for the last five years, according to the 2008 annual insurance market report.

An insurance industry whose penetration rate doesn’t reach 1% is considered to be operating below standard, according to international guidelines.

In 2008, Uganda accounted for only 0.4% of the total gross premium collected by companies operating in African in 2008, while South Africa, the continent’s insurance giant, accounted for 80%, with 15.3% penetration rate in an economy of up to $277b.

Insurance watchdog faulted on functions

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