Insurance grows percent

By Samuel Sanya

The insurance industry has registered an 18% growth in gross premiums for the year 2012, one merger and four new insurance companies are expected by the end of the year.

Impressive growth in fire, motor, engineering, group personal accident and medical insurance saw gross premiums hit sh351b in 2012 from sh296.83b the previous year.

Kaddunabi Lubega, the Insurance Regulatory Authority (IRA) boss, noted that overall growth had fallen from 23.69% in 2011 mainly due to high inflation rates in the first eight months of the year.

“The high inflation was followed by a tight monetary policy resulting into high commercial lending rates. This has generally impacted the demand side of the economy and reduced private sector borrowing,” he said at the IRA offices in Kampala.

Commercial bank loans averaged 24%, higher than the 18% average recorded at the start of 2011. Lubega noted that this reduced private sector borrowing, affecting insurance premiums on both business transactions and consumption activities.

Higher loan rates discouraged demand in the economy, bringing down premiums on loan money and premiums on motor insurance, which contribute significantly to the overall sector growth.

Non-life premium grew 19.34% to sh312.95b ahead of life insurance that grew 11.95% to sh38.28b.

Mariam Nalunkuuma, the IRA spokesperson, noted that the sector will soon implement provisions in the amended Insurance Act 2011 that require separate licenses for firms offering life insurance and non-life insurance.

“Insurance firms will be required to apply for either life or non-life insurance policies when composite licenses are ended in the year 2015. Insurance firms will have to rebrand and install separate boards, This will create employment opportunities for Ugandans in the insurance sector,” Nalunkuuma said.

The separation of licenses for life and nonlife insurance companies will boost the overall insurance sector penetration.

Nalunkuuma noted that two new insurance firms and two insurance brokers have applied for licenses.