P2P strategy can drive insurance penetration in Uganda

By Ndawula Yusuf Katerega

New technologies introduced to market have influenced people's lives differently. The insurance industry has embraced technological innovation, but the impact on the way it interacts with customers has been limited. In absolute terms, many people in Uganda including elites with low income spend less on insurance.

They need cheap insurance covers. But there is a way insurers can tap into Ugandans online. The online audience constitute organized forms of reciprocity that are more predictably reliable, and they are usually based on social capital and mutual trust of its members.

So how can insurers tap into the already clustered Ugandans online?

The social media forms are already shaping business transactions, politics and social interactions. Statistics show that internet integration is at over 5 million people and it's ranked among Africa's biggest social media users.

P2P harnesses technology to connect the insurance experience with its roots in organized mutual solidarity. Besides using savings, the mechanism most widely used by low income households in developing countries to cope with unexpected shocks is help from friends and family.

Peer-to-Peer (P2P) insurance is a customer-centric Industry innovation with customers being at the fore focus of the entire arrangement. Traditionally insurance is about pooling funds together to insure against risks. Since the pool is meant to cover losses for affected parties, conflict usually arise between insurers and the insured in regard to treatment of unused premiums. By nature insurance companies are moved by profits, any excesses from the pool are retained by the insurer not the pool contributors. The p2p model serves to benefit the customers more, but at the same time nurturing the experiences of both the insurer and the insuring clients. P2P insurance connects affinity groups of customers and enables annual cashback if the group connections remain claims-free in that year. Using latest technology concepts like crowdsourcing platform and social networks it pools friends, workmates, family members, communities and members with similar interests to create a pool for covering each other's losses.

P2p is operated on a number of models the most vibrate being the true mutuality model where group concepts are applied to try and influence customer behavior, but as the industry grows we can go the extremes like Teambrella's or Bought By Many's brokers model already adopted in USA and Europe.

World's biggest p2p companies like Lemonade tapped early into this social interaction and have continuously thrived on this. In Uganda tapping into any p2p model would help conventional insurers improve their growth momentum, deliver profitability and for Takaful it could be their best penetration strategy and tapping into the country's retirement savings space.

P2P Similitudes with Takaful

Islamic teachings stipulate that Muslims should accept any hardship that occur to them as a will of God (Allah). However, Islam still calls upon Muslims to take initiatives to minimize this misfortune. Insurance is designed to reduce the outcome and counter the impact of such misfortunes, though this insurance contract arrangement should be within the precincts of Islamic sharia law, free of Al - Gharar (Uncertainty of compensation), Al- Maisir (Gambling, nonpayment - due late death above the contract period) and Al- Riba (interest, making money from money).

Just like p2p insurance, Islamic insurance is built on the principle of joint guarantee (Tabarru) to help one another, policyholders willingly guarantee one another by subscribing to a pool of common interest. This arrangement is a collective innovativeness that allows a community to pool together resources to safe guard each other's losses.

Using P2P model to Introduce Islamic Insurance in Uganda as both a compliment and an alternative to conventional insurance, will promote the insurance industry and serve those having individual reservations with conventional insurance. Uganda has been slow paced in embracing Takaful, with its peers like Kenya having three operating takaful companies while Tanzania had three companies Azam, Zanzibar Insurance and Mo Assurance applying for Takaful licenses in March this year.

Hope insurers can take the positivism facets of P2P insurance to meet today's customer needs and life style.

The writer is a lecturer with MUBS, financial economist and a consultant with IIU and Graviola Associates