The Insurance (Bancassurance) Regulations, 2017 were recently gazetted, giving effect to bancassurance under the Insurance Act, 2017 (which is yet to commence) and the Financial Institutions Act, 2004.

The introduction of Bancassurance in Uganda

Bancassurance refers to an arrangement where an insurance company uses a bank’s sales channels to sell insurance products.

The Insurance Act expanded the definition of bancassurance beyond just the arrangement between the financial institution and the insurer or health membership organisation to use the financial institution’s channels to sell its insurance products. The definition now includes the financial institution acting as an agent for the insurer or health membership organisation and entering into a group or master insurance contract as a policy holder, with the intention that the customers (or a class of customers) of the financial institution obtain insurance covered under that contract.

Under the Insurance Act, a financial institution or a micro finance deposit-taking institution may apply to be a bancassurance agent with the approval of the Insurance Regulatory Authority (the “Authority”).

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 authorisation from the Central Bank.

Key points under the Insurance (Bancassurance) Regulations, 2017

  • application for a licence by a prospective agent is to be made to the Authority with a non-refundable application fee of UGX500 000.
  • unless otherwise approved by the Authority, the bancassurance agent and insurer are required to have an exclusive relationship. The relationship is to be governed by a service agreement between the insurer and the bancassurance agent in which the duties and responsibilities of both parties must be defined. The agreement should provide for the collection, remittance and reconciliation of premiums and other funds that may be received by the bancassurance agent. The agreement must be approved by the Authority.
  • bancassurance agents are required to pay an annual compliance fee of UGX1-million. The annual compliance fee is for the calendar year in which it is paid.
  • the Regulations require the bancassurance agent, at the time of making its application, to appoint a suitably qualified Principal Officer who will be responsible for the operation of the agent’s bancassurance business and who will be its representative in all matters regarding the bancassurance business. The Principal Officer must satisfy the fit and proper test.
  • the bancassurance agent must also appoint a Specified Person at each bank branch who shall be responsible for procuring and soliciting business on behalf of the bancassurance agent. The bancassurance agent must take out professional indemnity and fidelity insurance for both the Principal Officer and the Specified Person for the duration of its licence and authorisation of the bancassurance business. This cover must not be less than UGX100-million.
  • it is the responsibility of the Principal Officer and Specified Person to, inter alia, explain the insurance product of the bancassurance business to a prospective policy holder, inform the policyholder of the premium to be charged by the insurer for the product, explain to the policyholder the nature of information required by the insurer in the proposal form and the importance of disclosure of material information in the purchase of an insurance contract, and render the necessary assistance to the policyholders or claimants or beneficiaries in complying with the requirements for settlement of claims by the insurer.
  • all bancassurance products and services are to be approved by the Authority and the obligation is placed on the insurer to obtain approval from the Authority for any bancassurance products or services. A bancassurance agent is barred from developing or packaging an insurance product or service without the insurer.
  • bancassurance agents are required to submit, to the Authority, quarterly reports as well as annual returns on the performance of the bancassurance business. The reports must be submitted in the prescribed forms. The Authority is also required to inspect and supervise the records of bancassurance agents.
  • anti-money laundering and counter terrorist financing provisions are restated in the Regulations, requiring bancassurance agents to have “know your customer” policies, to maintain policyholder information for no less than 10 years and to report any suspicious transactions.
  • an insurer may be held solely or jointly liable with a bancassurance agent for the settlement of any complaint arising from the fault in performance by the insurer, bancassurance agent, Principal Officer or Specified Person.
  • advertisements by a bancassurance agent and insurer must be approved by the Authority.
  • notwithstanding the restriction on a person other than a Principal Officer and Specified Person from soliciting, procuring or facilitating bancassurance business on behalf of a bancassurance agent, a bancassurance agent is permitted to contract out its services to any person that the Authority approves.

Conclusion

The publication of the Bancassurance Regulations opens the doors for the roll-out of bancassurance relationships. We look forward to their impact on deepening insurance penetration in Uganda.