Barclays bank Uganda has become the second financial institution to get the Bancassurance license to sell insurance products to its customers and the general public.
The bank will, however, offer the products in partnership with insurance companies. Barclays says it will partner with five insurance firms.
Stanbic was the first to pick the license, which is renewable annually. Banks pay Shs 1m for a license. Rakesh Jha, Barclays Uganda managing director, told reporters this week that this was a new revenue stream for the bank.
“As a bank, our main task is to understand what our customers need in terms of financial solutions. Being able to offer insurance products will expand the range of products we offer. Our partnership is going to be extensive – partnering with five insurance firms,” Jha said.
He added the bank “would use the network that we have – 39 branches around the country” to reach as many people as they can.
Insurance Regulatory Authority boss Ibrahim Lubega Kaddunabbi said: “Bancassurance is intended to provide more distribution channels of insurance services to customers under one roof.”
Insurance in Uganda has grown at a pitiable pace with penetration at less than two per cent. Ordinary people don’t understand the sector and also there is limited trust that when one takes a policy, insurers will pay in case a claim comes in.
“In Uganda there is demand for simple products and largely from unserved and untapped emerging markets,” Kaddunabbi said. “We therefore believe that with the experience of Barclays, they will introduce products that speak to Ugandans.”
Kaddunabbi said this will see a swift growth in micro-insurance products. Bancassurance is as a result of the Public Finance Management Act 2015, which also paved way for agent banking in the country.
In neighbouring Kenya, Bancassurance is already a big deal with financial institutions cashing in. Recently, Miriam Magala, the Chief Executive Officer of Uganda Insurers Association, said there was “need to streamline consumer protection guidelines for our mutual clients as well as decide the model(s) between the partners.
If it is a profit sharing arrangement, the banks have a more involved role from product development to sales and marketing or if it is a referral system, the banks may only need to act as a referral point for all insurance business.”