Bancassurance gaining ground in Uganda – DTB

By Denise Kayiraba

Four years since Bancassurance was first introduced in Uganda, experts say the concept is gaining ground and soon every bank customer will also have a life insurance cover attached to their account.

The Principal Officer in charge of Bancassurance at Diamond Trust Bank (U) Ltd, Fred Baguma says the future of Bancassurance in Uganda is bright and that every bankable client shall have a life insurance cover in addition to the bank account.

“Signing up for this service is done at any of the DTB branches where there is a bancassurance specified officer well equipped to walk you through the product.

One would require a valid national identity card and for as less as 152,000 UGX, you are eligible for a life insurance cover with guaranteed maturity benefit of 11,400,000 UGX after five years subject to the consistent premium payment.”

Diamond Trust Bank (U) Ltd is one of the banks authorized to carry out bancassurance business in Uganda effective 1 st January 2020 having been licensed by the Insurance Regulatory Authority (IRA) Uganda.

The concept of bancassurance was originated in the European countries and spread gradually into other countries Uganda inclusive. The channel alone contributed to 5.57% and 2.23% in 2006-2007 under channel-wise new business performance.

Bancassurance, a sector which is still in the maturing stage, is a different channel of insurance. Maturity differs from different regions. The good news, it is expected to grow at a high rate in the coming years.

Bancassurance is a French term referring to the selling of insurance through a bank’s established distribution channels. In other words, we can say Bancassurance is the provision of insurance (assurance) products by a bank.

The usage of the word picked up as banks and insurance companies merged and banks sought to provide insurance, especially in markets that have been liberalized recently.

In some countries, bancassurance is still largely prohibited, but it was recently legalized in countries like the USA when the Glass Steagall Act was repealed after the passage of the Gramm Leach Bililey Act.

Bancassurance primarily rests on the relationship the customer has developed over a period of time with the bank. And pushing risk products through banks is a much more cost-effective affair for an insurance company compared to the agent route, while, for banks, considering the
falling interest rates, fee-based income coming in at a minimum cost is more than welcome.

In Uganda bancassurance has been accepted and is actually highly encouraged one the bank in question has gotten a license from IRA to conduct bancassurance business. Humans are known for their love for convenience.

This service is convenient in the sense that it’s a one-stop center for bank customers enabling them to access insurance services. It’s a win for insurance companies because it stimulates the coverage/consumption of insurance products due to the wider bank branches network.

In this highly technology-driven economy, flexible and convenient services are brought closer to consumers and consumer reception is vital lest they will be left behind. Baguma encouraged Ugandans to embrace these services that have been introduced to ease the purchase of insurance policies for those that require them.

He further added that insurance and its advantages have over the years been echoed and Ugandans have slowly embraced insurance and go-ahead to secure policies that will in a way or two safeguard them from different calamities.

Diamond Trust Bank (U) is one of the banks licensed by the IRA to conduct the Bancassurance business and it has partnered with leading insurers in Uganda like ICEA Life Insurance, Jubilee Life insurance, Jubilee General Insurance Company, MUA Insurance Company, Alliance Africa General Insurance Company.

Fact sheet on Bancassurance.

 Bancassurance refers to an arrangement between the Bank and insurance company (insurer) under which the financial institution distributes to its customers and prospective policyholders, through its distribution channels insurance products or services of the insurer.

 IRA (Insurance Regulatory Authority) is the governing body in charge of licensing banks authorizing them to carry out Bancassurance business in Uganda.

 In 2016, the Financial Institutions Act was amended to provide for bancassurance business. It specified that the Authority would be responsible for receiving applications from financial institutions for licensing to conduct bancassurance business, subject to prior written authorization from the Central Bank.

 Parliament in January 2016 passed the Financial Institutions Amendment Act allowing insurance companies to use banks as a distribution channel for their services. It is hoped that bancassurance will create opportunities for growth for both the insurance and banking sectors.

 The banks did not commence offering services to their clients immediately because the Bank of Uganda and the Insurance Regulatory Authority (IRA) had not developed the Bancassurance regulations. The regulations approved by the Ministry of Finance have been published in the Uganda Gazette meaning that banks can now partner with insurance firms to offer the services.

 The Bank progressively earns a fee income out of the business solicited, and their consistent target is to ensure that 10% of their customers acquire a life insurance policy.

 Diamond Trust Bank was licensed to conduct bancassurance business effective 1 st January 2020 and it partners with Uganda’s leading insurers ICEA Life Insurance, MUA Insurance Company, Jubilee Life Insurance, Jubilee General Insurance, Alliance Africa General Insurance Company.

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