Bancassurance has expanded quickly in Uganda in the short period since the banking law has allowed banks to distribute insurance products.
The Insurance Regulatory Authority says the insurance premiums from bancassurance stood at slightly above UGX26bn ($7m) in 2018 from zero in August 2017 when bancassurance regulations took effect after the Financial Institutions Amendment Bill was passed into law in 2016 allowing insurance companies to work with banks as a distribution channel for their services.
About 18 commercial banks are now licensed to offer bancassurance services, compared to two in 2017 when bancassurance was opened up, reported The Independent.
The Insurance Broker’s Association of Uganda is beginning to feel the pinch as more banks take on insurance distribution. Association chairman Solomon Rubondo said that some members are losing a portion of their businesses to banks which he said seem to be acting as insurance brokers as well.
While the banks argue that the UGX26bn written premiums in 2018 were from new business, Mr Rubondo thinks the earnings were instead from clients shifting from insurance brokers to banks. He said the composition of new business was small compared to what banks earned from bancassurance.
Bancassurance was allowed in the country in the hope that the channel would create growth for both the insurance and banking sectors. Uganda still has the lowest insurance penetration in eastern Africa at 0.8% compared Kenya’s 2.93%.