Uganda’s insurance industry must move beyond the traditional relationship between insurers and brokers, which has largely revolved around commissions and placing business, and embrace strategic partnerships that develop affordable products for millions of uninsured Ugandans, the Insurance Regulatory Authority (IRA) has urged.
Dr Sande Protazio, the acting chief executive officer of IRA, said the industry could not achieve meaningful growth by concentrating on the small proportion of Ugandans already insured while leaving the vast majority outside the insurance market.
Speaking at a recent dinner hosted by the National Insurance Corporation (NIC) for members of the Insurance Brokers Association of Uganda (IBAU), Protazio challenged insurers and brokers to shift their attention towards underserved communities and people who have never purchased insurance.
He said about 95% of Uganda’s adult population remained uninsured, raising questions about the sustainability of an industry whose players continued competing for business from the remaining 5%.
“The challenge is whether competition on the remaining 5% can deliver the desired future,” Protazio said. He compared the situation to competing for a small cake, arguing that insurers and brokers should instead work together to bake a bigger one by bringing new customers into the market.
The regulator’s message points to a broader business opportunity of expanding insurance coverage through partnerships that combine insurers’ underwriting capacity and technical expertise with brokers’ knowledge of customers and their risks.
Protazio said brokers understood clients’ needs and operating environments, while insurers had the financial and technical capacity to underwrite those risks. Combining these strengths, he said, would allow the industry to develop solutions for customers who are currently underserved or excluded from insurance.
He warned that when the relationship between insurers and brokers deteriorates, the customer ultimately bears the cost, often losing confidence in the entire insurance industry.
“Trust does not belong to the broker, insurer or regulator alone. It is a shared value that requires working towards protecting and building trust,” he said.
From selling existing products to developing solutions
For the industry to expand beyond its existing customer base, Ernest Magezi Barusya, the managing director of Kenbright Uganda, said brokers needed to reposition themselves as business developers rather than merely intermediaries who collect products from insurers and take them to clients.
He argued that brokers should actively identify people and businesses that are not insured, understand the risks they face and work with insurers to develop products that respond to those specific needs.
Rather than asking an insurer to provide an existing product for sale, Barusya said brokers should first establish what problems potential customers are struggling with before jointly designing appropriate insurance solutions.
“I do not believe in just saying to the insurer, ‘Give me your products’. Go to the client and ask: ‘What is your problem? What are you struggling with in terms of risks?’ Then work with the insurer to develop a product for you,” he said.
He said this approach would help move the industry away from generic products towards solutions designed around the needs and affordability of particular customer groups.
For example, businesses and individuals operating outside the formal insurance market may face risks that existing products do not adequately address. Understanding those risks, he said, would give brokers and insurers an opportunity to develop more relevant products and attract new customers.
Barusya also urged the industry to measure the success of broker-insurer partnerships by the number of previously uninsured customers they bring into the insurance market.
He argued that measuring collaboration by the amount of business transferred between brokers and insurance companies alone could conceal whether the industry was actually expanding its customer base.
He further noted that brokers could contribute to insurers’ profitability through risk management, helping customers improve their risk profiles rather than simply placing business that may eventually generate losses for insurers.
Mobile money offers a lesson
The opportunity for collaboration extends beyond traditional relationships between insurance companies and brokers.
Protazio cited the development of mobile money as an example of how industries with different capabilities can combine their strengths to reach underserved populations. He said telecommunications companies had infrastructure capable of reaching customers at the last mile, while banks had the financial resources and expertise.
By combining these capabilities, the two sectors created mobile money services that transformed access to financial services, especially among people who were previously underserved by traditional banking.
He challenged the insurance industry to adopt a similar approach by moving beyond company-to-company business arrangements towards joint product development and delivery.
According to Protazio, about 40% of Uganda’s gross written premiums are currently booked through intermediaries, highlighting the important role brokers play in distributing insurance.
He said this existing contribution could become a foundation for expanding the market if brokers and insurers invested in developing products and distribution arrangements that reach new customer segments.
For an industry seeking to expand its reach, such partnerships, he said, could also create opportunities to work with other players, including banks and telecommunications companies, to reach customers through channels they already use.
Trust and service delivery remain critical
However, expanding the market will require insurers to address service delivery concerns that affect the confidence brokers have in the companies whose products they distribute.
Rita Mutesi Kabayiza, the chairperson of IBAU, said brokers acted as independent risk advisers who represent customers, explain insurance and help them navigate their risks. Insurers, on the other hand, provide the financial capacity to support the risks presented by brokers.
She said the two parties needed to appreciate their complementary responsibilities rather than treat each other as competing distribution channels.
Kabayiza noted that some insurers had previously preferred dealing directly with their agents because they had greater control over them, unlike independent brokers who represent customers.
However, she argued that brokers offer more than business placement because they remain involved throughout a client’s risk journey.
She said this relationship could improve the quality and sustainability of insurance business through better risk management, improved client retention and stronger relationships between insurers and policyholders.
“We believe in relationships, and that is why it is important for insurers to collaborate with brokers,” she said.
Kabayiza said Uganda currently has 58 registered insurance brokerage firms, which she believes have the capacity to serve the available market. However, she said the industry’s growth would depend partly on how effectively these firms and insurers work together to reach more customers.
The concerns about service delivery were also acknowledged by NIC’s chief executive, Dan Musiime, who said brokers often put their professional reputations at risk when they recommend an insurer to a client.
He identified delayed or unpaid claims, inadequate servicing and failure by some insurers to fulfil promises made to customers as challenges that can undermine brokers’ relationships with their clients.
According to him, delayed payment of commissions also demotivates brokers, particularly when they have invested time and resources in securing business for insurers.
He said NIC recognised these concerns and was reinvigorating its service charter to improve its relationship with brokers, address service gaps and ensure that problems were openly discussed.
Changing how the industry measures growth
Beyond the relationships between industry players, Protazio called for a broader approach to measuring insurance sector performance.
He observed that insurance penetration in Uganda has remained below 1%, but cautioned against relying exclusively on this indicator to assess the industry’s progress.
Insurance penetration measures gross written premiums as a proportion of gross domestic product (GDP). Consequently, the ratio can remain low or decline when the economy grows faster than insurance premiums, even where the number of people buying insurance is increasing.
He said insurance uptake, which measures the proportion of adults purchasing insurance, provides another important perspective on the industry’s reach.
Protazio also pointed to Uganda’s planned GDP rebasing exercise, which could increase the country’s measured economic output and cut the insurance penetration ratio further.
He urged stakeholders to pay greater attention to the actual number of people insured and the value of assets protected, arguing that these indicators would provide a clearer picture of the industry’s contribution to managing economic risks.
Protazio said the real competition was not between insurance companies or brokers but against the millions of Ugandans who still believed they could live without insurance.
He used the analogy of two people attempting to cross a river: one has a strong boat but does not understand the river’s currents and hidden stones, while the other knows the river but has no boat. He said neither could successfully make the crossing alone, just as insurers and brokers could not independently unlock the market.
The challenge, therefore, is for insurers to provide the capacity and technical expertise while brokers contribute their understanding of customers and their risks.
COMMENTS