The Insurance Regulatory Authority (IRA) in Uganda is taking steps to address a significant issue in the country – a lack of insurance coverage for motor vehicles. According to recent data from the IRA, out of a possible 1.7 million insurable motor vehicles, only 452,954 units were insured in the year 2022.
This means that a staggering 67.7 percent of motor vehicles on Ugandan roads do not have valid insurance policies. The low compliance rate is attributed to weak enforcement mechanisms and limited resources for monitoring and penalizing non-compliant vehicle owners, making it challenging to enforce insurance requirements, especially in certain areas.
Mr. Protazio Sande, the IRA director of research, noted a slight improvement in compliance to about 32.3 percent. This improvement is attributed to the digitization of motor third-party payment and better enforcement through the integration of the IRA’s system with the Uganda Traffic Police’s express penalty tickets register.
Motor third-party insurance is mandatory for all motor vehicles in Uganda. Still, compliance remains low, with 85 percent of vehicles holding motor third-party policies and only 15 percent holding motor comprehensive insurance, which covers more risks.
A study conducted by the IRA for the period between 2015 and 2020 revealed persistently high levels of non-compliance. In 2020, compliance remained low at just 26 percent, resulting in significant revenue losses for the IRA and the government. The government reportedly lost an estimated Shs42.3 billion during this period, with the bulk of it due to Stamp Duty, while the insurance sector lost around Shs39 billion in written premiums.
The report also highlighted indirect losses to the government, such as corporation taxes and medical expenses for victims of accidents involving uninsured vehicles. Despite some growth in motor third-party insurance policies from 158,279 units in 2015 to 418,117 units in 2019, there was still a significant gap, as there are approximately 1.6 million insurable vehicles in Uganda.
To address these challenges, Mr. Sande emphasized the need for increased vigilance. The IRA and other stakeholders are currently working on amending laws related to motor insurance to enhance compensation limits, encouraging voluntary compliance. Additionally, the proposal of digital stickers aims to combat forged stickers, and enhanced penalties and sanctions against non-compliant motorists are under consideration.
The growth in motor vehicle insurance in Uganda is evident, with written premiums grossing more than UGX 170 billion, compared to just UGX 69.8 billion in 2015. However, ensuring that a higher percentage of vehicles on the road have appropriate insurance cover remains a priority for regulators.
