National Insurance Corporation (NIC) is planning an Initial Public Offering (IPO) this year. Paul Busharizi and Sylvia Juuko talked to the managing director, Segun Akinwale, about this and other issues
Has the global economic recession impacted on your business?
Despite the global credit crisis and local operational challenges, NIC recorded a modest growth in income from sh13b in 2007 to sh13b in 2008.
In this regard, the downturn presents an opportunity for people to invest in an initial public offer (IPO) because you buy at an affordable price. In this particular case, the Government is going to discount the actual value of shares to give a favourable price for the NIC IPO.
Why has the sale of the Government stake in NIC been characterised by delays?
Is NIC also going to sell some of its shares? If so, when will that be?
First, there were no deadlines to the listing. Like any other preparations for IPOs, the NIC IPO is in the hands of the transaction advisors, who determine the timetable. We do not determine the dates.
The work that goes into the pre-IPO preparations is enormous. That was not for NIC to determine but the regulators, who are working with the Government to make this IPO and eventual listing a success.
For now, it will only be the 40% government shares that will be listed. Therefore, the Industrial & General Insurance Co., who are the core investors, will not offload any shares.
Uganda has low uptake of insurance. How are you changing this trend?
As you have correctly stated, the insurance industry in Uganda is comparatively underdeveloped. Various factors are responsible for this situation like low insurance penetration due to the low level of awareness about insurance.
Insurance is for now more of an elites product, but they constitute a small proportion of the population. Other issues like poverty and low-income levels, make insurance appear more of a luxury for the low-income earners.
Other challenges include shortage of skilled manpower. The most critical issue is the perception by the population that insurance firms do not pay claims. This is a misconception.
NIC and the insurers association have on various occasions carried out media campaigns to sensitise the public.
We also conducted a Third Party insurance promotional campaign that lasted two years from 2006 to 2008. The winners of the campaign were flown to South Africa to visit the insurance sector.
We do this so for the public to understand that insurance is good for them. Currently, we have been running an awareness campaign at all our branches and outlets where our teams explain to the public the merits of insurance.
Give us an update on the agriculture insurance product
We carried out a research on the Ugandan insurance market and discovered insurance penetration at under 5%. Most of the key players in the sector concentrate on the urban market.
We decided to extend our products by aggressively re-engineering our process and came up with three policies.
We launched an educational insurance policy two years ago. Because of the AIDS pandemic, many of the students are orphans.
Making schools as collection points where about 1% is added on school fees helps reduce operational expenses. We will expand to cover the rural areas.
We have so far covered 51 schools in Kampala. Ugandaâ€™s economy is mainly agrarian.
To increase insurance penetration, we need to have policies that suit people. For commercial farmers, it is easy to apply because most of them are financed by banks and it is part of the requirements to insure stock, machinery or warehouses.
However, we are organising other farmers into cooperatives to deal with them collectively. We also introduced micro-insurance policies targeting the business community, especially small entrepreneurs.
We have partnered with banks in Kampala whereby we insure the funds they give out. This encourages them to give loans. In case of untimely death, the small-scale operators can make us pay. In other markets, it is subsidised by governments, but we donâ€™t have that here.
Do you expect this to be a major feature of your business in future?
From our research, if agriculture insurance is well marketed, it will account for a big chunk of our portfolio. It can easily be the leading portion although it is very risky. Those are the variables we have taken care of.
But we can work with, say, the meteorological centre to give us weather forecasts. The motive for this product is not profit, but giving something back to society. The rates will depend on the nature of crops farmers are engaged in.
What is your competitive advantage?
NIC was established in 1964 and was wholly owned by the Government until 2005 when it was privatised. In 2006, it was re-branded to reposition it as an insurance company of choice in the financial sub-sector.
We won the Uganda Insurance Brokers Association most Innovative Company Award for 2007/2008 in recognition of our product development and innovation.
Since NIC was privatised, the value for our shareholders has improved and the firm has consistently paid dividends.
Ignorance hurting insurance sector - NIC