CHAPTER ONE

INTRODUCTION ON THE LIFE ASSURANCE CONCEPT

1.1. Life Assurance Concept.

Life assurance is a contract between an insurance company and a policy holder, where the
insurer promises to pay a sum of money in exchange for a premium, upon the death of the
insured or after a pre-determined period. Life assurance protects future of your loved by paying a
lump sum amount reffered to as death benefit if an unfortunate event occurs. Some life assurance
policies provide a maturity benefit after the end of a policy term.

1.1.1. According to Kelvin J. Downes and Rosemary J. Gowthorpe in the book

"The process of financial planning : Developing a financial plan ".

Life assurance is a financial product that pays out a lump sum or regular payments to
beneficiaries upon the death of the insured person. It serves as a means to provide financial
protection and support to loved ones.

1.1.2. According to Keneth Black Jr and Harold D. Skipper in the book "Life
and Health Insurance".

Life assurance is a type of insurance that pays a specified amount of money upon the death of the
assured individual to their designated beneficiaries. It is a contractual arrangement between an
individual the policyholder and an insurance company.

1.1.3. According to George E. Rejda and Michael Mc Namara in the book

"Principles of Risk management and Insurance".

Life assurance is a contract that guarantees the payment of a specified sum of money upon the
death of the insured person or the expiration of a certain period. It is designed to help mitigate
the financial impact that may arise from the loss of an individual's earnings or to provide funds
for specific purposes, such as paying off debts, covering educational expenses or maintaining a
desired standard of living.

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1.2. Types of life assurance with examples.

1.2.1. Term life assurance policy.

These are policies that provide pure protection, that is by covering a person's mortality risk and
pay a death benefit only if the insured dies during the specified term. It is generally more
affordable than permanent life assurance. The owner agrees to pay the premium for a specific
term usually between 10 to 30 years. Term life assurance can be renewable or convertible. For
example; A 20 year term life assurance policy with a death benefit of 500000. If the insured
person were to pass away within the 20 year period, the beneficiaries would receive the 500000
payout.

1.2.2. Whole life assurance policy.

Is a permanent life insurance policy that pays the beneficiaries a specific amount upon the death
of the insured. The insured person is covered for the duration of their life as long as premiums
are paid on time. A portion of whole life premium goes towards the life assurance itself another
portion goes towards an account known as cash value. For example; If a 25 year old takes a
whole life plan at the age of 25 years, he will receive a lump sum payment at the age of 45 , the
age at which his 20 year premium payment term will expire. He can use this money for his
retirement and also his cover will continue till he runs 100 or till the date he dies. So the whole
life assurance policy is designed to mature when the assured reaches the age 100 at which time
the cash value would be equal the face value and become payable as a living benefit.

1.2.3. Endowment life assurance policy.

Is a type of life assurance policy that has both an assurance and a savings component. It pays the
face amount to the designed beneficiary if life assured dies with a certain period or it will pay the
policyholder if life assured survives to the end of the period. For example; Sarah, a 40-year-old
individual, purchases ABC Insurance Company's 10-Year Endowment Policy. She chooses a
sum assured of 1000,000 and pays a monthly premium of 100000. If Sarah were to pass away
within the 10-year term, her beneficiaries would receive the full sum assured of 1000,000 as the
death benefit.On the other hand, if Sarah survives the full 10-year term, she would receive the
maturity benefit.

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1.3. Importances of life assurance for individuals, household and country in
general.

1.3.1. Importances of life assurance for individuals.

Financial protection: Life assurance provide individuals with financial protection. It

assures them that their loved ones will be taken care of financially in the event of their death,
ensuring stability and the ability to maintain their lifestyle. Life assurance policies provide a
lump sum money to financially support the family in the case of the death of the assured person.
It can look after the family's regular expenses, future goals and any ongoing debts.

Peace of mind: Life assurance can offer peace of mind to an individual, helping to
ensure that the debts of an insured and the loved ones will be financially taken care of in the
event of death of the assured person.

Tool for saving: Some life assurance policies act as a tool of saving and investment to
individuals since they pay at the end of the period if life assured survives. For example;
Endowment life assurance policies pays an individual if survives to the end of the period.

1.3.2. Importances of life assurance to household;

Business Continuity: If a household includes a small business or family enterprise,

life assurance can play a critical role in ensuring business continuity. By having a life assurance
policy on the life of the owner or key person, funds can be accessed to cover the costs of
succession planning, transition, or provide financial stability during a period of uncertainty. This
enables the business to continue functioning and supports the livelihoods of the household
members who rely on the enterprise.

Estate Planning : Life assurance is an essential component of estate planning for

households. It helps facilitate the smooth transfer of assets, minimize estate taxes, and ensure the
efficient distribution of wealth to heirs. By designating beneficiaries, individuals can make
specific provisions for their loved ones.

College planning: Life assurance can also be used to secure funds for the
education of children or other dependents in the household. By providing a guaranteed payout, it

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ensures that educational expenses, such as tuition fees, school supplies, and university costs, can
be covered, regardless of the insured person's presence. This reduces the financial stress of
affording education and grants peace of mind, knowing that educational opportunities will not be
compromised.

1.3.3. Importances of life assurance to the country in general.

Financial Protection and Social Welfare: Life assurance serves as a financial

safety net that reduces the burden on public welfare systems. By providing individuals with
coverage against the risk of premature death or disability, life assurance helps prevent the
reliance on government support and social assistance. This eases the strain on public resources
and enables governments to allocate funds to other essential areas such as healthcare, education,
and infrastructure.

Risk Management: Life assurance plays a vital role in risk management for the
country as a whole. It helps individuals and businesses mitigate financial risks associated with
unexpected events such as death, disability, or illness. By providing a safety net, life assurance
limits the potential negative impact on the overall economy. It safeguards the financial stability
of households, businesses, and the broader society by reducing the likelihood of bankruptcy, loan
defaults, or widespread financial crises.

Social Security and Retirement Planning: Life assurance products, such as

retirement annuities and pension plans, play a vital role in ensuring social security and retirement
planning. As a significant portion of the population approaches retirement age, life assurance
offers individuals the means to accumulate retirement savings and secure a steady income in
their later years. This reduces the strain on public pension systems and provides individuals with

financial independence and dignity during their retirement.

CHAPTER TWO

LIFE ASSURANCE PRACTICES IN EAST AFRICA

By considering two countries of East Africa, Kenya and Uganda.

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In Kenya life assurance business generated through insurance agents accounted for 56.5% of the
segment’s gross written premium in 2014, while brokers and direct marketing accounted for
24.4% and 19.1% respectively. ( IRA 2015)

The life insurance market in Uganda has experienced steady growth since 2015. The annual
increase in net premium revenue experienced between 2015 and 2019 was consistent, ranging
between 23% and 34% annually over those four years. There was a dip experienced in 2020
which was attributable to the pandemic, whereby net written premiums increased by a lowerthan-
expected rate. Net premiums increased by 18% which was 9% lower than the industry average of
the prior four years. In 2021 however, there was a recovery as evidenced by the 24% growth in
net written premiums from 2020. This culminated in an overall increase in net written premium
from USD 24.3M in 2015 to USD 97.1M in 2021. (Insurance outlook report 2023)

2.1. Explanation about one type of life assurance found in Kenya and Uganda.

In Kenya and Uganda the one type of life assurance found is Whole life assurance policy which
is offered by Jubilee insurance company found in both countries. Below is the table which show
the comparison between two countries Kenya and Uganda on the provision of Whole life
assurance:

ASPECT WHOLE LIFE WHOLE LIFE

ASSURANCE IN ASSURANCE IN
KENYA UGANDA

Company Jubilee Life Assurance Jubilee Life Assurance

Company Company

Product name Jubilee Insurance Jubilee Insurance Whole

Whole Life plan life Assurance plan

Coverage Individuals aged 18-65 Individuals aged 18-

( May vary depending 70( May vary depending
on the policy) on the policy)

Premium Regular premium Regular premium payment

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 payment payment over the over the policy's term.
policy's term

Claim 1. Inform the insurer 1. Inform the insurer about

procedures in about the claim by the claim by contacting
brief. contacting the claims the claim department
department

2. Submit necessary 2. Submit necessary

documentation documentation, including
including the death the death certificate,
certificate, policy policy documents and any
documents and any other required proofs
other required proofs

3. The insurer asseses 3.The insurer asseses the

the claim based on claim based on policy
policy terms and terms and documentation
documentation provided
provided

4. If the claim is 4.If the claim is approved ,

approved, the death the death benefit is paid to
benefit is paid to the the beneficiaries
beneficiaries

Table 1.1. Comparisons between Kenya and Uganda on the type of life assurance provided in
both countries

2.2. The types of laws or policies available in relation to life assurance in

Kenya and Uganda.

2.2.1. The types of laws or policies available in relation to life assurance in Kenya.

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In Kenya, there are several laws and policies that govern the life assurance industry. These laws
and policies aim to regulate and ensure the fair treatment of policyholders and maintain the
stability and integrity of the life assurance sector. Here are some of the key types of laws and
policies related to life assurance in Kenya:

Licensing and Registration: The Insurance Act sets out the requirements for obtaining
a license to operate as an insurance company, including life assurance providers. It also mandates
the registration of insurance agents and brokers who sell life assurance policies.

Policy Documentation: The Act prescribes certain requirements for policy

documentation in relation to life assurance. Insurance policies must be in writing, provide clear
and accurate information about the terms and conditions, and inform policyholders about their
rights and obligations.

Regulatory Oversight: The Insurance Regulatory Authority (IRA) is the regulatory

body responsible for overseeing the insurance industry, including life assurance providers. The
IRA has the authority to monitor and enforce compliance with the Insurance Act, conduct
inspections, and impose penalties for non-compliance.

These policies and laws at the country level aim to ensure the integrity, stability, and consumer
protection within the life assurance sector in Kenya. They are designed to establish a fair and
transparent environment for insurance companies and provide confidence to policyholders in
carrying out their insurance activities.

2.2.2. The types of laws or policies available in relation to life assurance in Uganda.

In Uganda, there are various laws that govern the life assurance industry and ensure the fair
treatment of policyholders. These laws provide a regulatory framework for insurance companies
and aim to protect the interests of policyholders. Here are some of the key types of laws available
in relation to life assurance in Uganda:

Insurance Act: The Insurance Act is the primary legislation that governs the
insurance industry, including life assurance, in Uganda. It provides a legal framework for the
licensing, operation, and regulation of insurance companies. The act also outlines the

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requirements for capitalization, solvency margins, policyholder protection, and other aspects of
insurance business in the country.

Insurance Regulatory Authority of Uganda (IRA) Act: The IRA Act established
the Insurance Regulatory Authority of Uganda as the regulatory body for the insurance industry.
The IRA is responsible for licensing and supervising insurance companies, promoting
compliance with insurance laws and regulations, and protecting the interests of policyholders.

Policyholder Protection Regulations: The IRA has issued Policyholder

Protection Regulations to ensure fair treatment and safeguard the interests of policyholders.
These regulations stipulate requirements for policy document disclosures, claims settlement
procedures, transparency in insurance contracts, prompt resolution of complaints, and fair
treatment of policyholders by insurance companies.

It is important for insurance companies, agents, and policyholders to be aware of and comply
with these laws to ensure transparency, accountability, and the protection of policyholders' rights
in the life assurance industry in Uganda.

2.3. Challenges facing Kenya and Uganda when it comes to offering life
assurance.

2.3.1. Challenges facing Kenya when it comes to offering Life assurance

When it comes to offering life assurance in Kenya, there are several challenges that insurance
companies and the industry as a whole face. These challenges include:

Lack of Awareness: There is a lack of awareness and understanding about life

assurance among the general population. Many people have misconceptions about insurance or
do not fully comprehend its purpose, making it difficult to promote and sell life assurance
policies.

Affordability: A vast segment of the population in Kenya faces financial constraints,

which makes it challenging for them to afford life assurance premiums. The perception of
insurance being expensive hinders its adoption, especially among low-income individuals and
families.

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 Cultural Factors: Cultural attitudes and beliefs can influence the perception of
insurance in Kenya. Traditional beliefs and practices regarding wealth management and
inheritance may discourage some individuals from considering life assurance as a viable
financial tool.

Regulatory Environment: Insurance companies must navigate a complex regulatory

environment in Kenya. Compliance with licensing requirements, capital adequacy regulations,
and reporting standards adds to the operational challenges faced by insurers.

Product Customization: Modification of life assurance products to meet the diverse

needs of the Kenyan population can be a challenge. Developing products that are relevant and
appealing to different demographics and income levels requires research, innovation, and market
insight.

To address these challenges, collaboration between insurance companies, regulatory bodies, and
the government is necessary. Efforts to raise awareness, improve financial literacy, create
innovative and affordable products, and build trust in the insurance industry can play a
significant role in expanding the offering and uptake of life assurance in Kenya.

2.3.2. Challenges facing Uganda when it comes to offering Life assurance.

When it comes to offering life assurance in Uganda, there are several challenges that insurance
companies and the industry as a whole face. These challenges include:

Low Awareness and Understanding: Similar to other countries, low awareness

and understanding of life assurance hinder its uptake in Uganda. Many people are not familiar
with the concept, benefits, and importance of life insurance, which affects the demand for such
products.

Limited Accessibility: Insurance companies often struggle with reaching

potential customers in remote areas of Uganda. Lack of infrastructure, limited distribution
channels, and inadequate outreach efforts make it difficult for insurance providers to extend their
services to all regions of the country.

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 Affordability: Affordability is a significant challenge in the context of life
assurance in Uganda. Many individuals and families may find it challenging to afford life
insurance premiums due to financial constraints and competing priorities.

Lack of Trust and Negative Perception: Some potential customers may have a lack
of trust or negative perceptions about insurance companies in Uganda. Historical cases of
delayed claim settlements and issues related to transparency have contributed to this challenge.
Building trust and instilling confidence in the insurance industry is essential for overcoming this
barrier.

Cultural Factors: Cultural beliefs and practices can influence the demand for life
assurance in Uganda. Traditional burial practices, informal social security systems, and other
cultural factors may affect the perception and adoption of life insurance products.

Addressing these challenges requires collaboration between insurance companies, regulators,

government entities, and industry stakeholders. Raising awareness, improving accessibility,
offering affordable products, enhancing financial literacy, and building trust are key focus areas
to promote the adoption of life assurance in Uganda.

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