Insurance premiums to rise

By Samuel Sanya

A new training levy by the Insurance Regulatory Authority (IRA) is set to increase the price of insurance premiums as the sector looks to groom local talent and boost penetration.

Clients will incur a 0.5% increase on insurance premiums that will be channeled to the Insurance Institute of Uganda (IIU) as the sector readies for the impending oil economy.

The levy became effective on October 1 and will be charged on all new policies issued, renewals and endorsements, as long as these attract an additional premium.

“We want the insurance industry to be run by Ugandans and in the next 30 years, we hope that this can be achieved.

“With more Ugandans running the industry, we can be sure of increased insurance penetration and awareness,” said Godfrey Kihuguru, the IIU boss.

“The O.5% increment is modest to me, and though it will increase premiums in the short term, premiums reduce in the long run after getting more efficiency and professionalism,” he added.

The industry is highly liberalised with 21 licensed insurance companies, 25 insurance brokers, one re-insurance broker and 12 loss assessors with more than 80% run by foreigners as local universities have few tailored courses to churn out talent for the industry.

Insurance sector premiums grew to sh296.8b in 2011, up from sh239.98b on the back of strong returns on investments despite a turbulent economy that influenced individual and business incomes and demand for insurance.

Large non-life insurance premiums of sh262.24b boosted total collections with life insurance collections accounting for 12% or sh34.2b.

Motor third party premiums topped non-life insurance premiums at sh81b, beating fire insurance premiums at sh43b, miscellaneous accident premiums at sh42.7b, and marine/aviation premiums at sh21b.

Kaddunabbi Lubega, the IRA boss, pointed out that the recent premium collections were still below potential and that the regulatory was looking to up its awareness campaigns.

“The performance of the insurance industry is still sub-optimal with total premiums accounting for only 0.65% of the gross domestic product. While this points to an opportunity for growth, there is need to improve business in the sector,” he said.

“The authority is also working closely with the Uganda Insurers Association to license a national reinsurance company, which once operational, will reduce premium flight,” Kaddunabbi explained in an interview last week.