TOP 4 CLASSES OF INSURANCE IN UGANDA

• August 7, 2021
• LUTAKOME
• 2 comments

Despite the business disruption during 2020 due to COVID 19 total lockdown and the aftermath, the insurance industry rose to a milestone 1 Trillion shillings and although this looks very low as compared to 148 Trillion shillings GDP, it’s a milestone in an industry which grossed 39 Billion 20 years ago.
The insurance industry has taken giant strides in the 20 years from the turn of the millennium and not even the 103% depreciation in the shilling has halted the growth which is over 27 & 13 times in shilling and dollar terms respectively
In this article I share the top 4 classes of insurance which also contribute 65% of the gross written premium.

Medical Insurance: medical insurance is the single largest class of insurance and contributes 23% of the industrial gross written premium; the friendly nature of the insurance regulation has removed all the boundaries on this class of insurance and its underwritten by all categories of insurance licenses with a total of 7 insurers (both life and non-life) plus 5 HMOs. This posted an impressive growth of 15% going into financial year 2020 and is expected to grow due to 2 main factors; the planned implementation of the National Health Insurance Scheme plus the increased awareness by the COVID 19 pandemic impact on the cost of private healthcare

Individual Life: This class of insurance posted a whopping 30% growth in 2020 overtaking the quasi compulsory motor insurance; Individual life insurance contributes 50% of the life premium in Uganda and 17% of the entire market, mostly distributed by tied agents individual life is likely to give medical insurance a serious challenge for the top spot in the coming 5 years and due to the long term nature of the individual life policies is a key tool for mobilizing revenue for national development.

Motor Insurance: Motor Insurance comprising Third-party and Comprehensive insurance registered an 8% growth in 2020 which was impressive under the circumstances but not enough to retain the previous position thereby contributing 14% of the total premium; the year 2020 was characterized by a total lockdown and curfews which led to total grounding of private cars affecting policy renewals hence reduction in income. The insurance players need to learn from these incidences by introducing short term rates and rewarding good behavior and discounting blackout periods like total lockdown to drive equity, hence building confidence.
There are areas of growth for this class of insurance due to the ban on importation of cheap old vehicles which is likely to trigger credit purchase of cars necessitating compulsory comprehensive insurance as well as the recent agreement on the pipeline which is likely to drive demand for ground transportation.

Fire Insurance: Fire Insurance contributed 14% of the total industry premium, the growth was only 4% which was dismal given the increased work from home culture which was expected to drive home insurance uptake. Under this class, insurers have traditionally relied on commercial buildings and mortgaged property both of which were heavily affected by the covid 19 disruption in 2020.

Potential New Challengers for Top 4

Agriculture: agriculture employs a significant proportion of our population and Uganda having the largest portion of arable land in the region, our economy is poised to transition into a food basket in Africa’s most populated region and this presents a great opportunity for agriculture insurance to take off.

Engineering: the construction of the pipeline connecting Hoima to Tanga is definitely going to require insurance for the heavy machinery involved and given the scope of works, Engineering insurance might make it into the top 4 within the next 3 years.

Aviation & Marine : the recent changes in taxation which would require all importers of goods into Uganda to buy marine insurance from the Ugandan market, this is likely to boost growth of the local market; coupled with this the recent resumption of the national career, Uganda Airlines, which has kicked off with a small fleet is likely to leverage the oil boom in the region and increase fleet size in the next 4 years thereby increasing the premium contribution through this line.

Credit Life: the growing middle class is likely to steer demand for basic needs such as shelter; service providers such as real estate firms are already teaming up with lending institutions to work out financing options for the customers and these will require credit life insurance to boost the collateral security for the financiers.