Insurance industry records 8% drop in profit to Shs17.93bn

Gross underwritten premiums to plummet in 2020

THE INDEPENDENT | ISAAC KHISA | A surge in claims and management expenses saw Uganda’s nonlife insurance firms record 8% drop in profit to Shs17.93bn for the year ended Dec.2019.

However, the industry executives said there is nothing to worry about since the purpose of insurance is to pay claims in an unfortunate event to the insured.

Data from the Insurance Regulatory Authority of Uganda shows that the medical insurance continues to be loss making, with Health Membership Organisation alone recording a loss of Shs 2.36bn.

“We shall be examining this class to rule out possibilities of fraud in this line of business,” IRA Executive Director, Ibrahim Kaddunabbi Lubega said.

Overall, the industry remained on a positive trajectory, recording a 13.2% growth in gross underwritten premiums to Shs973.58bn.

Non-life insurance business recorded an increase in underwritten premiums from Shs572.79bn in 2018 to Shs621bn last year.

Life insurance business recorded an increase in underwritten premiums from Shs217.97bn to Shs 276.32bn during the same period under review.

Similarly, HMO’s and micro-insurance specialist company recorded 9% and 1,131% growth in premiums to Shs75.26bn and Shs299million, respectively, during the same period under review.

“Despite the continued dominance of the Non-Life business, the Life insurance business continue to grow relatively faster at 26% compared to 8.5% of Non-Life business and HMOs 8.9%,” Kaddunabi said.

Kaddunabi said the sharp growth in the gross underwritten premiums is attributed to the growth in uptake of medical insurance class of business mainly by corporate institutions, increased uptake of agriculture insurance, enhanced distribution channel as well as enhanced insurance customer confidence in the sector.

However, insurance penetration reduced from 0.84% to 0.77% following rebasing of the economy last year.

Bad outlook

Going forward, Kaddunabi said the insurance industry, just like other industries, has already been affected by the coronavirus pandemic, and that it is likely to record a drop in gross underwritten premiums this year.

“Whereas quarter one of performance of 2020 shows positive growth, about 11% growth, the effects of COVID-19 are to be felt from second quarter onwards,” he said.

“Preliminary indicators point to a decline in performance in the second quarter of up to about 50% compared with a similar period in 2019.”

“How worse or well it gets will depend on the direction the pandemic takes. Otherwise, some recovery is expected beginning next month once the budget is read.”

Last year, the insurance industry recorded Shs 284.12bn for the first quarter the year ending March.

Initially, industry officials had anticipated to record at least 10% growth in gross underwritten premiums in 2020.

However, all is not lost. The industry executives say there are signs of successful containment of effects of COVID-19 as people slowly return to work, and that once the discussions on the stimulus package are actualized, they expect the economy to recover, and insurance to pick up.

They are also hoping that COVID-19 is likely to improve risk awareness amongst the population as it has demonstrated how devastating an unplanned risks can be.

And, that the compulsory uptake of marine insurance from local players effective next month via an online platform that has been developed is expected to generate significant premiums.

****

CLICK TO READ ONLINE MAGAZINE HERE

Share on:

WhatsApp

The post Insurance industry records 8% drop in profit to Shs17.93bn appeared first on The Independent Uganda:.