Ugandan insurance regulator okays banks to offer insurance services
Following the publication of regulations that will guide banks intending to offer insurance services by the Ugandan insurance regulator, banks have expressed appetite in offering insurance, a move industry players hails as a win to the customers but one that could affect insurance companies.
According to the Bank of Uganda deputy director of commercial banking, Godfrey Yiga Masajja, the move is meant to “increase the services that can be provided by [commercial] banks.”
The idea of bringing commercial banks on board, according to Insurance Regulatory Authority, targets to increase insurance penetration, which is currently at 0.86 per cent. It contributes less than one per cent to the country’s Gross Domestic Product.
However, some insurance brokers and agents expressed fear that they might run out of business as banks might take up all the available opportunities. Bancassurance is an arrangement between a financial institution and an insurance company under which the financial institution distributes to its customers an insurance product on its behalf.
According to the Insurance Agent’s Association chairman, Joshua Kisami, agents dealing with a single bank might further make business hard.
“Will it still be possible that insurance agents will only be [restricted to] selling to one bank?” he wondered.
In response to staff raiding by commercial banks, Ibrahim Kaddunabbi, the chief executive officer at IRA, said insurance companies might have to revise their workers’ terms of employment.
“Regarding losing staff, those in HR know that if you train, you must also have a retention policy,” Kiddunabbi said. “If you have trained your staff and they are good, make sure you retain them because labour movement is free.”
Some insurance companies are already associated with some commercial banks. Gold Star is associated with Crane bank and Jubilee is associated with Diamond Trust bank.
Yiga said that allowing banks to be insurance brokers not only means more options for customers but also better products offerings.
In the draft Insurance (Bancassurance) Regulations, 2016 issued by the Insurance Regulatory Authority (IRA), banks will be required to hire Bancassurance principal officers and other people responsible for marketing and procuring insurance business for the banks.
The regulations are part of the process to operationalise the amendments to the Financial Institutions Act, 2016 that allows commercial banks to start selling insurance products.
The required experience, according to the regulations, is eight years in insurance-related business for principal officers. Insurance companies are concerned that banks will raid insurance companies for their staff.
The proposal, which was suggested by some insurers, was that there be a transition process of up to three years that sets restrictions on the movement of the human resource from the insurance companies.
Insurance brokerage firms are also at risk of losing key experienced people to banks that are selling insurance products.
The IRA has, however, played down the possibility of placing restrictions on labour mobility.
