RK: I always start with a bit of background, who is Kwame Ejalu?
KE: I will start from my professional career. I started insurance in 1997. It was 6 months after leaving university. I opened up an insurance brokerage company called Liberty Insurance Brokers.
RK: Let me stop you there and take you back. At what point did you realise that you wanted to pursue insurance as a professional career.
KE: At no point in my education. I had different plans. The major plan was to pursue economics or finance and I thought I would go down that route. I had my first placement before graduation at Coopers and Lybrand which is now PWC. But for my own reasons, I decided not to continue with that and I ended up doing insurance which was 6 months after graduation.
RK: What was the thought process that led you to arrive at insurance?
KE: Not everything is a very carefully thought through process. What happened was that I was supposed to do my ACCA almost instantly after finishing my degree. That was the requirement of my employer. But I had had a rough previous year because I was unwell. I wanted to take off some time. Then they told me to step out of the business and come back when I was ready to do the exam which was around six months. I got bored with 2 months and was searching on what to do.
At that particular time, a gentleman called Peter Okwi was retiring from the National Insurance Company which was the leading insurance company in Uganda at the time. He came up with the idea of setting up an insurance brokerage. I listened to his ideas. I liked what he wanted to do and we agreed to join hands and become partners. That was the formation of the business.
RK: Unlike most of us, you didn’t spend a lot of time being employed, no?
KE: No. You could say the only employment I had was that while I was at university.
RK: So you’re telling us about the journey, continue please.
KE: We knew what we were doing. Your major challenge was to get in touch with clients who were mainly taking their decisions outside Uganda. They were going to Nairobi or Johannesburg or any other capital. And therefore there was need for us to find a form of international linkage to be able to do the bigger businesses such as Stanbic.
RK: Let me stop you again, can you tell us the difference between an insurance broker and the insurance company.
KE: An insurance broker is the person that advises you on insurance. We all know, insurance is a very complicated document with very many companies and policies to choose from. An insurance broker is one who helps you to decipher all that. They will help you with what cover you need. And what type of company you will need. In case there is a loss, they will help you with how to go about it. Basically, if you are a business, they are your insurance department. If you are an individual, they are your insurance advisor.
The insurance company on the other hand is the one that carries the risk. It is the one that pays that cheque. In the world of insurance, because insurance is complex, the cost of an insurance consultant is inbuilt in an insurance policy. You do not pay any extra for the services of an insurance consultant or broker. Even if you do not use them, you do not get a discount either. That’s how it works.
RK: To make sure I understand you correctly, what you are saying is; the whole insurance thing is such a complex mind field that whether you are an individual or business, you are better off getting an advisor who will show you how business is made. But I also know that when you suffer loss, the insurance company is always looking for ways on how to minimise on compensation. If you don’t know you are going to need an advisor to help you, is that right?
KE: That is accurate. The best way to understand the role we play; is when there is a loss. It affects the bottom-line of an insurance company. Paying you affects them. Us, on the other hand, when you pay the premium we get paid. The next time we get paid is when you pay the premium again. Therefore, it is in our interest that you collect on that loss so that you retain me. So that is why the use of an insurance broker is very important. His next cheque comes after you have succeeded with your claim and renew the policy.
RK: You started this business and realised you needed to exist where strategic business was being made, tell us more about that.
KE: I started on the journey. I started attending international seminars where I was sure I would meet the big players to acquaint myself with them to see who would be fit. Fortunately for us, at the same time, the Alexander Forbes Group which was the biggest brokerage firm in Africa ranked #8 at the time, was also looking for a partner firm. They were in Kenya and Tanzania but not in Uganda. They were struggling to manage general accounts. They came over and sought references. When they did their due diligence they decided we were a perfect fit. We concluded that deal in 2003 and at that time President Cyril Rwamaphosa was our chairman.
RK: You then now built the business. You built the brokerage sector that is now fairly large, is that correct?
KE: Correct. We’d like to think that we did things a bit differently. The doors opened for us. Those days in Uganda, it was critical to have a foreign linkage to be trusted by everybody. I am happy to report these days things have changed, Ugandans are happy to trust their fellow Ugandans in doing business. We’ve gone 360 degrees around and it is great for us.
We have been able to expand our business. Now we do insurance from the dog to the aeroplane. We have experts we can call to support in all areas.
RK: On this session there are individuals of small and medium sized companies. And many of them see insurance as an unnecessary cost. You are up there with the dentist. You postpone going to the dentist until you can’t sleep for two nights and then you go to them. Why would anyone need to insure against all these risks?
KE: I want to start with an individual. We all have aspirations for ourselves and for our families. Not every well thought plan goes that way. You must have things to fall back on that will protect what you have acquired so that it is always there to serve you.
Let’s assume you have acquired a car at UGX 25 Million. This is not money you can get every day, even if you can afford to get another car the next day, there are other things you could have done with that money. Insurance is part and parcel of financial planning. It is akin to building a house and not putting a front door. You are leaving anything that may want to destroy what you have to enter.
Look at the individual life cycle. You get a job that pays you well and then get a family. Let’s stop there. At that point, your number one asset is your health. Should your health become unmanageable, then everything else falls apart. We’ve all heard horror stories where you discover something that requires a huge amount of money. All these costs do not come when you are prepared.
RK: Let me paint a picture of a couple of scenarios that have come when no one is prepared.
We have all seen guys come on social media to fundraise for someone. These things are setting in quickly. For the last two months, we have been treated to the horror stories of people failing to pay their bills for covid treatment. People are giving away their houses and other assets.
Those are the kind of things you are talking about, no?
KE: True. Even if you work with the government, if you fall sick in July, at the beginning of the budget, you might be taken to India. But if you fall sick in April at the end of the budget, there might not be any money for that kind of treatment. The risk is real for you and your family. Whatever happens to your family, happens to you.
The number one asset anyone has is yourself and your health.
RK: Let’s also look at the less risky stuff as well. It could be as mundane as headache. In terms of today’s medical set up in Uganda, how important is it to have health insurance.
KE: It is very critical. There are very few facilities and limited resources. If you don’t have it, you will need to go the government hospitals. The best way usually is having access to private health care. And the best way to fund health care is medical insurance.
In terms of providers, there are really descent service providers out there. They are increasing every day. Health insurance is growing stronger. At the beginning of the pandemic, we didn’t have a cover for covid, now thy have evolved, one or two of them are covering covid.
RK: For an individual, you started with health, what else?
KE: Yes. From an individual, you get married and next you have a child. The day you hold your first child, your dreams are high. That is the right time you should get a life insurance policy.
RK: What is that?
KE: A life insurance policy is one which pays out to your family in case you are not there. When you pay a premium, you agree that in case I am not here, this is what it will pay you. There are exclusions to it though. Things like suicide may not be taken care of.
With life insurance you pick a number that you want to be covered. You pick a number that you think your family will need to go through as though you were there. The insurance company will then price it for you. When you are young the price is not so bad.
RK: What do you mean by young?
KE: Let’s say at the beginning of your parenting life. Wherever that is, you need that policy. As you acquire assets in your lifetime, this policy becomes less important. Let’s say you had put a billion shillings for your children which includes buying a house and now you have the house. The next important thing is the education of the child and the well-being of the family. As you acquire more and more assets, my advice is that you keep dropping the level of life cover that you may need. Life insurance when you have dependants is very critical.
RK: Let me talk to young people who are just starting out in life especially if you’re married and your children are between the age of 0-10, please go out there and find an insurance broker preferably Kwame, talk to them about the appropriate insurance cover that you need to take. This is not a joking matter.
Kwame, what else should someone lookout for?
KE: As you grow, you acquire some assets and you do not need much of the life insurance. If you reduce on your life insurance and don’t cover in your assets, then you could have a problem if something happens to those assets.
RK: Let’s break it down the more
KE: When it comes to asset insurance especially, fire and allied risks, the first thing I want to say is that is it extremely cheap. It is 0.15%. for a house of UGX 300M, you pay UGX 450,000 a year. That does not cover for fire alone, it includes burst water pipes.
Those three: health, life and asset are very critical. Imagine a situation whereby you have to borrow, pay a bank even when your house is burnt.
RK: By the way, if you acquired your house as a mortgage, the bank will require you to pay for insurance anyway.
KE: It is true. But you also have to follow it diligently because it is not for their benefit. It is for your benefit. I must add that banks now days have bank insurance licence. They are able to arrange all this for you as well.
Insurance looked at alone is not sexy but if you look at it as part and parcel of your planning, or defence for whatever you have worked for, then it makes sense because there is no point being taken 1 year back, a period for which you could have saved for your house and now you have to start afresh.
So have a strong front door. I have heard people say, I have paid for insurance for a long time and nothing has happened. I have never heard them say, I have paid for burglar proofing for long and nobody has come so let me remove it. It’s pretty much the same. We must agree it is a grudge purchase. Intangible. You don’t get to hold it. it’s only a promise but a very important promise.
RK: Let’s put it right for our people. It is much less burdensome for you to pay insurance premium and collect when a problem occurs than to run around fundraising for health from people for you to recover when a challenge comes.
KE: I agree but let’s look at our culture. If you are fundraising for a wedding, you will get very many people, try and fundraise for a house and see how far you will get. That is why nobody is fundraising for a house, nobody is going to come to you. That is how our culture works.
But there is pride in standing on one’s only two feet, isn’t there?
RK: There is. But also even the prudence of it; being able to protect what you have sweated for to acquire.
KE: So those are like the must haves. And then there are the good to haves. They are so many.
The life policy fortunately covers you for accidents. But if you are like me and you have kids in school who need laptops, the kids will always drop and break them. you know the price of a laptop. I don’t want to be paying for a laptop in a year or two years.
But for UGX 100,000, that laptop is insured and it is replaced. Instead of having to pay another UGX 1M, I will only pay UGX 100,000 and it will be done. Those are good to have.
RK: Talk about motor vehicles.
KE: First all there is own damage, that means your own car can get damaged. The second is a third party. You might hit someone’s expensive car, and you have to find that money.
When you buy motor vehicle insurance, it automatically covers own damage. The damage to your own car. But the third party limits might be low. We must realise that we are driving with a lot of people with expensive cars. Any cost of damage to such a car is quite high. The good news is covering the damage to such a car is not that expensive. You should insure your vehicle including high limits on third party damage in case it’s your fault.
The other thing that often makes you recoup your money is the windscreen. I get a windscreen crack at least once a year, my insurance premium has always come back on windscreen premiums because I tend to change it at least once a year and it costs quite a bit.
Own damage is critical and make sure your 3rd party limits are up there.
The other critical thing is that it included towing charges. Finally, you might consider getting a policy that allows you to get another car while yours is being fixed. That is also an option and it is available in Uganda.
RK: I didn’t know that. What would you say to the entrepreneurs here about insurance?
KE: First of all, I am going to assume they are service businesses. The first thing is that you must take care of your people. Once you take care of the people, they will take care of the business because you are aware. Downtime when workers are not there, will affect you. So it is important to make sure that they have those medical covers. It is not a rule to have, it is a must have if you expect full activity out of them.
A business can have challenges surviving if you are not there. You are the vision bearer. And to hire such as you have to run such a business might become more expensive than you working there.
There is an insurance that ensures the continuity of that business in case you are not here. The keyman insurance pays a business an amount of money that it needs to hire someone your calibre to ensure that your business succeeds. Now, you need to remember that the reason you have that business is because it plays a part in your life and the life of your family. So it’s continuity is critical. And if you are the critical person, then you may have to plan for the continuity of that business and that is where the keyman comes in.
In terms of business continuity those are the keys ones.
RK: How about fro groups and workers?
KE: There’s the worker’s compensation. That is required by the law of the land requires having worker’s compensation for your people. Worker’s compensation covers the work from home to work and back home using the most direct route and during working hours. We modify it a bit and call it group personal accident which covers that worker 24 hours a day and country wide.
The reason why this is expensive is because if a worker has a workplace injury; it could ab a back problem for people in the service industry. For people in industry or one form of accident. There is a labour office which protects these employees and once an employer is not complaint they got o the labour office.
This labour office will get a doctor will compute a rate that will be given to you the employer and you have to pay. You cannot run away from it.
Two things that are statutory that you cannot run away from are 3rd party motor insurance and worker’s compensation. We are looking at it from a potential liability that could hit you and ruin your business.
Myself as a business, we do advise. My regulator which is Uganda insurers association requires that I carry a professional indemnity insurance meaning that nay errors and omissions on part in advising my client, the client is compensated for any mistakes that I may make.
The same is now required of lawyers when dealing with serious accounts. The same is also required of other professionals such as valuers. And even if your regulator does not require it, whenever you are pitching for work, it is very good to tell your client that they have the professional indemnity. It shows the confidence that you have in what you are doing and the fact that they are covered in case their advice does not prove to be what they thought it would be.
RK: A lot of us have loans, there is a regular requirement to take out insurance on the security you are submitting, do you want talk about that.
KE: Yes. The banks are doing two things. Let’s assume it’s a house, they have to make sure that;
- The security does not disappear i.e. a fire or anything that could destroy it.
- They make you take some form of life policy they call a mortgage protection. That protection is in case you are not there; they get paid their money but more importantly they don’t have to kick out your family. So they just hand it over to the family. That’s the reason they insist on those covers.
RK: There is something cropping up among “entrepreneurs”, is there a requirement for insurance at some point it?
KE: Yes, there are people who require a big bond, so when you bid for a job, they have to ensure that once you bid and get it you will carry through with it when your bid is successful. Then later, they may require a performance bond meaning that now that you have got the job, you can now do it and conclude it to their satisfaction. Those are a big requirement particularly in the world of construction as well.
RK: I think some of these requirements are meant to make sure you treat your workers well, isn’t it?
KE: Yes. Recently, I submitted tenders into the oil and gas sector.
RK: Hold it there, talk about insurance in the oil and gas sector
KE: They are particular because they have had a hell lot of experience from where they have been. They have had challenges with contractors who have failed to fulfil their obligations due to an uninsurable risk. So they require that you have very good advice and coverage on insurance.
You are aware that our industry is very new. We cannot carry very big risk. We do what we call re-insurance. The insurance companies also insure overseas. The OICs will always look behind and see who has insured with insurance companies and whether they are solid enough to ensure that there is payment if something happens. That stringency is there but the good news is in terms of advice and in terms of sorting those covers we have the capability in Uganda to do that.
RK: Basically the advice to people in business is to look at their insurance since it will be a requirement to get business?
KE: Yes. As you prepare for those bids, speak to your advisors just as you would to your lawyers. So that you can have something competitive that you are putting forward.
Comrade Otoa: How ready is the insurance sector for the humongous oil and gas project coming in?
KE: Like I said, the local capacity is limited. There are different levels involved. At the advisory level, we have all that it takes to advise on the oil and gas sector. We have also partnered with companies that have experience in this sector.
At the insurance company level, there is a limited capacity. the entire balance shit of all insurance companies in Uganda cannot cover the oil and gas risk. We are going to have to develop that capacity slowly. Right now, we probably could not cover 5% of it. what we have done is to put together a consortium which have gone out to get capacity elsewhere. Once we have fulfilled all our capacity in Uganda, then the client will go and get additional cover from the market. what will hopefully happen, we shall be able to take on more risks in accordance with the capacity that we have.
RK: One of the sectors that is exposed is agriculture, what is there that people can take on that can protect them?
KE: I am a little bit disappointed with my own industry that we have not disseminated information sufficiently. This needs to be done by our associations and our regulators. We need to do some work on this. However, we have very good agricultural and crop insurance in Uganda. The Bank of Uganda an d the government recognise it. as soon as you apply for the cover, the insurance company will apply on your behalf of your premium will be discounted by half.
So there is a mechanism that the government of Uganda has of paying half of your premium to encourage take on agricultural insurance. That is why I am saying I am disappointed in the dissemination of information.
RK: So what does it protect or cover?
KE: Mainly crop failures. Those are easy to prove. Also they make sure you have a basic operating procedure like pest control. For example, when you have an overwhelming case like locusts, that I compensated. It is one of those that we should have made a little bit of noise about, but it exists.
The other thing that is available is livestock insurance. Livestock can be fully covered from disease and death. It is not new. The insurance companies are going for the low hanging fruit.
RK: What’s the best way of encouraging people to take on insurance?
KE: All the players’ details are online. from companies to brokers you can get them online. the market is getting tighter. Once you call out the regulator, they will come to you, you don’t have to go to them.
The banks are also now selling insurance though their ability to advise in some sectors will be limited.
Tayebwa: What happens when I want to switch policies, will I be refunded? 2) How do you deal with gadgets that run out of the market.
KE: This is how insurance works, in case you take out a motor policy and claim even once on it, you cannot seek a refund. However, if the policy is under 6 months you can claim a refund. You will be charged an incontinence fee on it.
2) An insurance policy last for 12 months. The year you take the policy is the year the gadget will be considered as current. If you brought us a big Motorola today, we probably wouldn’t take it.
Matama: I happen to belong to a group of poultry farmers, we were told of agriculture and crop insurance, many farmers went for it. At that time, maize was heavily hit, when it came to compensation the insurance companies were not coming through. 2) I once took out a life policy, I took over a policy for 18 years after nine years, I went to check on it and the lady asked me to surrender it.
KE: An insurance policy is very many pages; I cannot know at this point in time which one went wrong. But I feel and understand your frustration. That is why I advise that whenever you are going to buy insurance, please go with an insurance broker. They are there and they do not cost you anything.
2) I would like to look at that if you don’t mind.
Dark & Lovely: What does travel insurance exactly cover?
KE: The biggest thing that travel insurance covers is when you get unwell while you are there. Secondly, it pays where you have missed a flight but you are not in your country. It will give you some form of compensation. It will cover for inconveniences of losing baggage. If you, God forbid, passed on during your travel, it will pay to return your remains into your country of origin.
Sam Rwakoojo: What would it cost to start up your own insurance company?
KE: In terms of capital, it will be to a tune of UGX 4 Bn. You will also need to put in place, acceptable insurance cover. You will also need to have sufficient working capital and qualified staff.
RK: Kwame, if you found yourself sitting with a family and they are trying to figure out their way in life, how would you persuade them that their future lies with insurance?
KE: I will tell you a story. An insurance salesman went to sell life insurance to a family at about 7pm. After a bit of small talk, he asked the lady: what would you do if your husband was pronounced dead. Then the man wanted to respond to it but he was quickly reminded; “you’re already dead. Let her talk.” The wife told her husband to pay the life insurance.
You need to recognise that some of the things we are talking about, you will not be there to take those decisions if that risk materialises. It is very critical to realise that.
RK: I would like to say Thank you very much. You have opened my eyes on agriculture, I didn’t know it existed. And travel, I thought it was just a requirement for travel.
Kwame: Thank you for the opportunity you have given me.