Top 10 Challenges Faced By Insurance Companies in Uganda

Insurance companies in Uganda faced a series of challenges that impact their functionality and their ability to provide quality services to the general public.

You need to note that each particular insurance company may face its unique challenges, however, here are the top 10 challenges faced by insurance companies in Uganda that you need to know:

1). High taxes from the Government

The first major challenge faced by insurance companies in Uganda is the high government taxes they are required to pay yearly.

The tax for registration of insurance companies is very high. Insurance companies in Uganda are subjected to an 18% value-added tax for every claim that they made.

Also, insurance companies in Uganda are under obligation to pay 30% corporate tax each year for every profit that they made.

Insurance companies in Uganda are also subjected to 0.5% taxes on all investments that they make each year.

These high government taxes can affect the revenue generation of these insurance companies. It can also set the stage to discourage new insurance companies from coming into the market places.

2). High Inflation

Insurance companies in Uganda have also suffered the challenge of a high inflation rate.

Inflation brings about an increase in goods and services in the market. It brings about an increase in operational costs for insurance companies, as they are forced to pay higher salaries to employees, high rent, and high costs of utilities.

Inflation in Uganda also results in higher claim costs to the insurance companies inflation has resulted in insurance companies spending more income on claim damages and repairs. This can cause most insurance companies to be at high risk of defaults as they are not able to afford the high cost of expenses in a single year for all damages or costs.

3). Lack of knowledge of the importance of insurance

Funny as it may be, the majority of persons living in Uganda do not have adequate knowledge of what insurance is, or how insurance companies function.

This has become a major challenge to insurance companies as they are trying to sell a service or product in the market which users do not even understand.

4). Unfavorable regulatory environment

The regulatory environment for insurance companies in Uganda is not always favourable. This has become a major challenge to most insurance companies operating in Uganda.

The Insurance Regulatory Authority (IRA) has received criticism for its slow approval of new products and for not doing enough to protect consumers from dishonest insurance companies.

5). Low Insurance penetration in the rural areas

The 5^th major challenges faced by insurance companies are their low coverage of insurance services in rural areas.

Almost all the insurance companies in Uganda are concentrated in the urban cities of Uganda, leaving the rural areas uncover.

The absence of insurance companies in rural areas often put a lot of strain on users who have to travel long distances to move to urban areas just to make use of insurance services.

The issue here is that insurance firms in Uganda may not have a thorough knowledge of the risks that rural consumers confront. This might make it difficult for them to properly price insurance products and offer adequate coverage.

6). Lack of Trust from the Public

There is still a great lack of trust from many Ugandans in the role played by insurance companies in society.

Few individuals who have used insurance services in Uganda; have a sad story to tell. Many individuals seem to have no trust in the presence of insurance companies in Uganda.

The inability of insurance companies to stand up for their customers during their time of need has resulted in a lack of trust. This accounts for the low patronage of insurance companies in Uganda.

7). High Competition among Insurances companies

The 7^th major challenges faced by insurance companies in Uganda are high completion within the insurance sector.

The number of insurance companies competing with one another in Uganda over the last decade has increased very drastically.

The issue with high competition from insurance companies in Uganda is that the majority of all the insurance companies are located in urban city centers such as Kampala, Hoima, Soroti, Arua, Mbarara, Gulu, etc, all trying to sell their services.

This increased competition among insurance companies fighting for customers, often creates doubt in the minds of the public, if Uganda Insurance is out to help the public.

8). Economic Instability

Economic instability is another major challenge faced by insurance companies in Uganda.

When an economy is unstable, no business works well, this is also true with insurance companies.

An unable economic means that consumers would have less money to spend on insurance services. This would reduce the revenue earn by these insurance companies and can result in the closure or collapse of an insurance company.

Also, during an unstable economic period, there would be an increase in the number of claims made by individuals. This is because many individuals would turn to experience losses during the economic meltdown.

This can put strain on the insurance companies, in the management of their operational cost, which might result in higher claim defaults rate among insurance companies.

9). Low adaptation of Technology

With the advent of modern technology, some insurance companies are resistant to change and still operate using the traditional system. This is true for most insurance companies in Uganda.

The majority of the insurance companies in Uganda lack a basic website or social media presence that can help increase their visibility to the general public.

Few insurance companies working on technology still failed to upgrade to recent modern technologies.

The issue of low adaptation of insurance companies is that it brings about poor document management which often results in delays in their provision of services.

10). Lack of well-skilled manpower

The last major challenges for insurance companies in Uganda are the lack of skilled manpower to run and operate these enterprises.

Most of the newly opened insurance companies are understaffs and lack well-trained professionals who have experience in managing an insurance company.

The lack of skilled manpower from insurance companies in Uganda only results in a lack of trust from the public and also can affect the overall quality of services render by these insurance companies.

Final Conclusion

There are many more challenges that plague the insurance companies in Uganda. However, the above-listed 10 are the major common challenges faced by both old and new insurance companies in the insurance market.

Despite these difficulties, the insurance sector in Uganda nevertheless has several opportunities. The Ugandan insurance market has the potential to expand greatly if it can overcome the difficulties it is now encountering.

The government is also making efforts to encourage the expansion of the insurance sector, such as by giving insurance businesses tax benefits.

Read: 

• Top 10 Challenges Faced by Commercial Banks in Uganda