Micro-insurance: Lifting up the poorAccording to Insurance Regulatory Authority (IRA) statistics, Uganda’s insurance industry consists of 30 insurance companies, 12 health membership organisations and 27 brokers. Yet the non-business insurance is still extremely underdeveloped.

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At 0.85 per cent, Uganda has the poorest insurance market penetration as a percentage of Gross Domestic Product (GDP) in East Africa compared to Rwanda’s 1 per cent, Tanzania’s 2.3 per cent and Kenya’s 3.8 per cent according to IRA.
Critics, however, believe the low levels of trust in financial services, high costs and critically the lack of suitable distribution and payment channels have also caused scarcity and low penetration of insurance products.

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Only 4.8 per cent of Uganda’s work force is employed in the formal sector implying that only a small slice of the population has access to worker’s compensation insurance. On the other hand, motor vehicle insurance is typically obtained by those who own cars- another select segment.

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So, how does the rest, which is the majority population, mitigate risk? They are left to use unproductive coping strategies such as removing children from schools, delaying healthcare, selling livestock and other productive assets, getting loans from money lenders and borrowing from friends and family to deal with risks and everyday life shocks.

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Just recently, Bank of Uganda approved long-awaited amendments to the Financial Institutions Bill, including provisions to allow for assurance.
Parliament said allowing bancassurance will provide a major boost to the nascent insurance market in Uganda.

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Micro insurance, in particular, is the key to unlocking this market as it is certainly a risk management instrument; but can also be used as a tool to extend social protection.

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Micro insurance is insurance for people with low incomes that gives them the ability to manage risks. But not many are aware of this.

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BIMA (which means insurance in Swahili), a fairly new micro insurance company in Uganda, believes in creating a world where everyone can access the products and services needed to protect their family’s future. BIMA is one of the world’s leading provider of low-cost insurance that is using mobile technology to disrupt the global insurance industry and fuel financial inclusion.

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BIMA aims to provide insurance to the next billion population in the world who do not have enough financial protection through designing simple, affordable insurance products, that anyone can enroll for simply by using a mobile handset; a first of its kind in Uganda.

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BIMA, which has a presence in 14 countries around the world, entered the Uganda market just over a year ago and currently has two products on the market: Family life protect and Medi-cash. The former is a life insurance policy that pays customers Shs1m in the event of death or permanent disability from accident or injury.

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Prices start from as low as Shs5,000 for three months of coverage. Medi-cash is a medical insurance policy that provides a cash pay-out for customers that spend two or more nights in a hospital ( public or private licensed by the Uganda Ministry of Health). Prices start from Shs10,000 for six months of coverage.

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In an interview, M Danielle Treharne, the country manager for BIMA Uganda, said: “We started out with these two products in particular because we believe that insurance access is about more than affordability; it’s about designing products and models that actually work for consumers that are new to the concept of insurance.”

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Treharne who believes micro insurance is a concept whose time has come, adds: “We strive to increase awareness and understanding of insurance to our low income consumers through one to one education at point of sale. It’s not just about the sale but giving our customers options for financial protection and better access to health care.”

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In an interview, Brenda Nangobi, one of the beneficiaries who lives in Kalerwe, said: “When I went to the BIMA offices with my late husband’s policy card, I did not even have a mobile phone or transport but the staff at BIMA was so friendly and sympathetic that they got me a phone, processed claim and I was given Shs1 million after two days yet my husband had only paid Shs5,000”

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She added: “The BIMA claims officer further went on to give me sound advice on how I should spend that money wisely to invest in a business that can generate income. I do not know what I would have done. I am very grateful to my husband and BIMA.”
Nangobi said with the money from the cover, she has been able to keep their two children in school. She also bought a cow which is in her village in Masaka. She gets income from selling milk from it.

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Partnerships with governments, communities, non-governmental organisations, multi-national organisations are crucial to the success of micro insurance.
Government needs to create incentives for private-sector organisations to develop insurance solutions for the previously uninsurable. Donor and community groups need to cooperate by providing infrastructure, insights into customer needs, endorsement and other forms of assistance.
The shared goal is to reduce inequality between the affluent and those who are most exposed to the risk of adverse events beyond their control, while easing the burden of social support which sits heavily on government’s shoulders.
Currently, BIMA is in partnership with Safeboda and Hellofoods to protect and secure the future of boda boda cyclists and their families given that they are a very high risk vulnerable group.

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Numbers

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0.85%
Percentage of insurance penetration in Uganda according to Insurance Regulatory Authority.

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Shs5,000
Price one pays for three months of coverage.

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Shs10,000
Amount of money one can pay for six months of coverage.

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Shs1 million
Amount of money paid under the family life insurance policy in the event of death or permanent disability from accident or injury.
From: Monitor Publications

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