Increase in claims. The dip, according to Insurance Regulatory Authority, was a result of an increase in paid out claims that depressed actual growth in the sector.
Kampala. Profitability of non-life insurance policies, the biggest premium contributor for insurance companies fell by 14 per cent in the year 2017, due to an increase in the number of claims.
The growing claims, according to Insurance Regulatory Authority (IRA), depressed actual growth in premiums that increased to Shs516b in 2017 from Shs450b in 2016.
According to results released by IRA, gross claims increased by 11 per cent from Shs261b in 2016 to Shs291b in 2017.
Out of that, non-life insurance increased by 11 per cent.
“Non-life underwriting profitability reduced by 14 per cent from Shs12.4b in 2016 to Shs10.7b in 2017. The reduction in underwriting performance is mainly attributed to the increase in claims paid out by the industry (an increment of 11.7 per cent),” Mr Ibrahim Kaddunabbi Lubega, the IRA chief executive officer, said.
The reduction in profitability will call for more action from the insurance companies, whose premiums arise mainly from non-life insurance.
Mr Deepak Pandey, the Jubilee Insurance managing director, told Daily Monitor in an interview that reduction in profitability was a global problem that will need insurance companies to cut administration costs and increase premiums.
“It is a universal trend that while insurance claims are going up, premiums are going down. [Current] premiums are not enough to take care of business,” he said.
The results also indicated that life insurance grew faster than all other segments registering a 27 per cent growth from Shs132b in 2016 to Shs168b in 2017.
Health and Maintenance Organisations (HMO) on the other hand registered the slowest growth with 0.7 per cent from Shs52.5b to Shs52.1b. Mr Kaddunabbi attributed the marginal growth to the few number of licensed HMOS, being a recently introduced segment, exacerbated by delays in passing of the National Health Insurance Bill which will make medical insurance compulsory for everyone.
Subsequently, the sector collected total gross premiums of Shs737.2b, a 16.1 per cent increase from 2016 at Shs634.8b.
Mr Kaddunabbi said the increment was due to innovations in micro insurance, increased uptake of agriculture and medical insurance.
“Increased uptake of medical insurance [now the largest class of business] by corporate institutions. Medical insurance gross premiums underwritten grew by 33.16 per cent from Shs121b in 2016 to Shs161b in 2017,” he said.
While penetration still sits at 0.73 per cent, with new infrastructure projects, marine insurance, innovations coupled with increased consumer confidence, the Insurance Regulatory Authority
expects the insurance sector to grow by 12 percent for the year 2018/19.