Financial Institutions Act to be amended

By Oyet Okwera

BANK of Uganda (BOU) is preparing to submit legislation to Parliament aimed at amending the Financial Institution Act 2004. This is intended to enable banks undertake bancassurance which exists in some African countries like Ghana and South Africa. 

This was disclosed recently by Emmanuel Tumusiime Mutebile, the BOU governor, while addressing insurance stakeholders in a ceremony to celebrate GoldStar Insurance’s acquisition of ISO 9001:2008.

“The Insurance Act has already been amended to allow for bancassurance but the Financial Institution Act unfortunately prohibits it, which is why we are hoping to amend it,” Mutebile said

Bancassurance involves a bank providing outlets through its branch network for the sale of insurance products, especially life insurance and pension products to clients. Under bancassurance, the bank operates in partnership with an insurance company with the latter holding assets and liabilities of the insurance business. 

According to Mutebile, bancassurance can lower the cost of providing insurance products. 

In some European and Latin American countries, more than half of all life insurance premiums are generated through bancassurance. In India, bancassurance has led to rapid growth of the life insurance business.

Mutebile is optimistic that bancassurance will give a major stimulus to the growth of the insurance market in Uganda.