Validation of a Report, an Assessment of the Microinsurance Needs of Uganda’s Informal Traders

Kampala, Uganda: The Uganda Insurers Association (UIA) and the Makerere University Business School (MUBS) will today, during a validation workshop share findings from research that assessed the microinsurance needs of Uganda’s informal traders to inform microinsurance product development.

This follows feedback from traditional insurance providers that suggests a lack of knowledge and data necessary to develop microinsurance products that meet the needs of the population.

Microinsurance operates the same as conventional insurance except that it targets low-income individuals allowing them to pay smaller value premiums for protection from commensurate risks. The flexibility of the microinsurance product makes it potentially suitable for consumers in Uganda’s informal economy, who form most of the working population in Uganda.

Insurance plays an essential role in the economy by providing a buffer should risks such as poor health, theft, fire, or damage occur. However, the level of insurance penetration in Uganda is extremely low at approximately 1%. This low uptake is largely due to low income and therefore, cost of insurance, lack of knowledge and awareness of the product and low levels of trust from most of the population.

“A key solution devised to overcome the perceived high cost of insurance, especially among the lowincome population, is to provide a customised microinsurance product to meet the specific needs of this segment of the population,” explains Mr Jonan Kisakye, the Chief Executive Officer, Uganda Insurers Association.

While the benefits of microinsurance products are generally accepted, the microinsurance market in Uganda remains small. As of June 2022, there were only two microinsurance firms in Uganda, one of which is yet to provide microinsurance products.

The research found that the understanding of microinsurance and the main risks facing market vendors differed from one stakeholder to another. Most market vendors are not willing to pay for insurance which isn’t tangible and from which they might not benefit or retrieve a portion of the premiums paid.

Those willing to pay indicated the ability to pay premiums amounting to Ush30,000 monthly. These were willing to pay for microinsurance products that feature medical-related products, simplified documentation, affordability, and diversity of products.

Additionally, a generally limited understanding of insurance and a lack of trust in providers were noted.

“Based on the research findings, we recommend sensitisation and awareness initiatives that promote microinsurance literacy among informal groups as a tool to increase uptake. There is also need to encourage consumer protection against exploitative pricing and poor products. Further, insurers need to adopt a marketing strategy that clearly articulates the value proposition by recognising the differing needs and attitudes of the market vendors,” says Dr Rachel Mindra Katoroogo, the lead researcher and Dean, Faculty of Commerce and Senior Lecturer at Makerere University Business School.

“Financial Sector Deepening Uganda offered financial and technical support to this research process because of the important role insurance can play in creating financial resilience. This research study is one of a number of collaborations between universities and local industry associations that we have supported to promote contextually relevant research for the financial sector. We hope this will increase collaboration between academic institutions and associations to develop evidence-based solutions for financial inclusion,’’ says Joseph Lutwama, Director of Programs, Financial Sector Deepening (FSD) Uganda.

Note to the editor

About UIA

The Uganda Insurers Association (UIA) is an umbrella organisation for all insurance and reinsurance companies in Uganda and works for the establishment and development of a sound insurance industry. UIA works to advance the interests of insurance and reinsurance companies by adopting a common strategy that encourages and promotes close cooperation, the exchange of business among members, builds on knowledge through research, influences the enactment of favorable legislation, and represents the views of the membership to the Government, quasi-government, and private bodies. The insurers are 36 and reinsurers, 4. The insurers are divided into non-life totaling to 21 companies, life has 9 companies and there are 2 microinsurance companies.

About MUBS

Makerere University Business School (MUBS) is the leading provider of business and management education and research that facilitates professional and industry development in the region. MUBS was established to centralise the development and standardisation of business and management education in the country while creating an environment and opportunity for the young and old to develop their talents and strengths through different academic and training programmes. These programmmes are offered at undergraduate, postgraduate to professional level.

About FSD Uganda

Financial Sector Deepening (FSD) Uganda is the country’s leading ‘think and do tank’ on financial inclusion and inclusive financial market development. FSD Uganda is an independent not-for-profit company committed to promoting greater access to financial services. FSD Uganda seeks to develop a more inclusive financial sector with a focus on low-income individuals. We support innovation, conduct research, and support regulatory processes that shape the financial sector. The organisation is funded by the Bill & Melinda Gates Foundation, the European Union, and the Mastercard Foundation.

For more information, please contact:

Peter Simon Odoki, Public Relations Officer, MUBS via podoki@mubs.ac.ug or +256-772402575/+256-702402575

Kalule Gava Ibrahim, Publicity, Advocacy and Market development Officer, UIA via ibrahim.kalule@uia.co.ug or +256-782 044 787

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