Opportunities and challenges to innovation in the Ugandan insurance market

Opportunities and challenges to innovation in the Ugandan insurance market

15 June, 2021    

Most Ugandans face insurable risks, yet uptake of insurance remains very low at only 1.4%. Innovations in global insurance markets have illustrated how insurance can be better designed, offer more affordably and thus provide better value for customers.

Uganda enacted a new Insurance Act in 2018. This act expanded the Insurance Regulatory Authority’s (IRA’s) mandate to include market development. The IRA has, in line with its recently expanded mandate to encourage market development, committed to create an enabling environment that fosters innovation to ensure that more Ugandans are more effectively protected with appropriate insurance products.

To assess the changes and adaptations they needed to make to strike the balance between innovation and risks, the IRA partnered with FSD Uganda and Cenfri to conduct a market innovation gap assessment, a regulatory assessment and an institutional assessment. The objective of these assessments was to identify the unique challenges in the market and potential tools that could be adapted to the context. 

On 19 November 2020, the IRA hosted an Innovation Workshop in collaboration with FSD Uganda and The Innovation Village, and with support from Cenfri. The event convened the regulator, licensed industry players, potential market entrants (such as fintechs) and donors around the topic of innovation in the Ugandan insurance industry. The aim of the workshop was to provide an opportunity for industry to network and consider potential partnerships.

The CEO of the IRA, Alhaj Kaddunabbi Ibrahim Lubega, opened the workshop. He said that the IRA has changed the way it operates in reaction to the impact of COVID-19 and emphasised the IRA’s commitment to promoting innovation in the Ugandan insurance market by introducing the Innovation Awards of 2020. In these awards, the most innovative licensed players will be identified, recognised and rewarded. He said that the Awards were aimed at fostering innovation and creativity in the insurance sector and increasing access to insurance. He encouraged industry further by saying that he believes that “innovation and the adoption of new technology have the potential to change the value of insurance” and, in doing so, improving access and enhancing financial inclusion. He concluded by urging industry to act now. Quoting an American author, Zoey Sayward, he said, “Don’t wait for the perfect moment, take the moment and make it perfect.”

Following the CEO’s address, the structure of the workshop consisted of a panel discussion on opportunities for insurance innovation in the time of COVID-19. This discussion was followed by breakout groups, in which participants discussed their chosen innovation-related topics, including consumer research, platform economy (distribution opportunities), regulatory obstacles, simplifying the customer journey (remote onboarding), and digitalisation.

Some of the key take-aways from the discussions were:

  • COVID-19 has forced both the IRA and the Ugandan insurance industry to rethink the way in which they operate now and in the future. The pandemic has had a significant impact on insurance industries worldwide and in Uganda. Businesses experienced a greater impact than households due to business interruption policies that exclude pandemics. As a result of the restriction of movement during the lockdown period, sales and premium collection in most cases collapsed drastically. Operational challenges faced by insurers included the inability to go in to work and receive paper documents, which in a market that depends heavily on paper-based systems, affected claims processing and caused significant delays. Positive industry growth rates during the lockdown period demonstrate the resilience of the Ugandan insurance industry, especially given the collapse in sales and premium collection in many African markets, but also that the demand for insurance opportunities in the market increased. The IRA’s decision to relax cash-and-carry regulations during this time also supported organic business growth and renewals.
  • Insurers were forced to innovate and digitalise to at least some extent during the national lockdown. Some of the processes put in place to survive during that time now form the foundation for innovative strategies for operation in the future. Industry players who had already invested in technology and digitised their processes found it easier to transition to remote work and found that COVID-19 did not disrupt their operations to the extent that they expected. A minority indicated that whilst they were forced to digitalise during lockdown, brick-and-mortar operations returned to usual once lockdown came to an end. However, the majority of licensees are of the view that digitalisation will continue and spread across more components of their businesses as we go into 2021, with many of them already moving to online engagements with customers.
  •  COVID-19 has highlighted the importance of, and opportunities for, partnerships. The IRA is committed to fostering innovation through an enabling regulatory framework and encourages industry to grasp these opportunities to offer innovative products that offer real value to consumers in order to grow and develop the insurance market. The pandemic highlighted the importance of partner channels. Insurtechs faced major challenges during lockdown as they were heavily reliant on physical distribution as well as their underwriter partners who struggled with paper-based operations or were inefficient in dealing with working remotely (including making use of the technology that is required with that). Partnership between industry players is vital, but another partnership that is equally important is the relationship between the regulator and market players. The consensus across industry was that their engagement with the IRA throughout COVID-19 has been smooth and that the IRA has been responsive. In their pursuit of fostering an enabling regulatory environment and one that is conducive to partnership formation, the IRA has put in place a number of mechanisms to regulate for industry innovations, including the adoption of the risk assessment tool in the product approval process, as well as publishing sandbox guidelines.

Sande Protazio (Director of Planning, Research and Market Development, IRA) wrapped up a successful morning of discussions and networking. He acknowledged that the Ugandan insurance industry is at the beginning of a long journey and warned insurers that they will need to innovate or die. He emphasised a changing mindset and encouraged industry to come along on the innovation journey so that, in a few years they can celebrate the fruits of their labour.

View the case study Size 2.40 MB

This collaborative work was done over three phases and it would not have been possible without the support of FSD Uganda, IRA Uganda and The Innovation Village.
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