Premium debtor management challenges and strategies in Ugandan non-life insurance businesses: A case study of Lion Assurance Company Limited

Abstract

The Insurance Industry in Uganda currently has 20 licensed non – life insurance companies, 6 life insurance firms, 26 insurance brokerage firms, and 939 (as at 14 August 2014) agents all competing for the small market that had an insurance penetration of only 0.85% by 31 December 2013 and expected to increase marginally to 1.3% by 2016. This small market is thus characterized with stiff competition, a population with low awareness of the necessity and mode of operation of insurance business, and low income levels that makes the sale of insurance products on credit terms inevitable. This results into insurers having large premium debtors’ balances in their books of account that take long to be turned into cash, sometimes leading provisions for doubtful receivables and write - offs. The purpose of the study was to identify the causes of outstanding premium debtor management challenges in Ugandan non – life insurance companies and strategies in place that can be adopted to overcome it. The research was conducted at Lion Assurance Company Limited. The study was guided by specific objectives outlined in section 1.4 to this report. Results showed that insurers, brokers, agents and clients and were all to blame for the outstanding premium debtor management challenges in the industry. Measures instituted by IRA and embraced by the industry had gone a long way in solving the problem. However, brokers’ dominance in the market, stiff industry competition, lack of cooperation amongst insurance players, on – site and off – site supervision efforts by the IRA being low and general low awareness of the operation of the insurance sector have contributed to continued existence of premium debtor management challenges.