MAKERERE UNIVERSITY

FACTORS ASSOCIATED WITH BANCASSURANCE ON THE PERFORMANCE OF

INSURANCE IN UGANDA.

STUDENT NAME: KAYONGO HENRY

REG NO: 19/U/19669/PS
STUDENT NO: 1900719669
SUPERVISOR: MR. KAKAIRE GRACE
MAKERERE UNIVERSITY
BACHELOR OF SCIENCE IN ACTUARIAL SCIENCE
SCHOOL OF STATISTICS & PLANNING

A DISSERTATION SUBMITTED TO THE SCHOOL OF STATISTICS & PLANNING IN PARTIAL

FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF A BACHELOR’S DEGREE OF
SCIENCE IN ACTUARIAL SCIENCE AT MAKERERE UNIVERSITY

NOVEMBER 2022
 DECLARATION

Factors Associated with Bancassurance on The Performance of Insurance in

Uganda.
I hereby declare that this thesis is my own original work and has not been
submitted to any other college, school or university for academic credit

oq )
Signature:
Kayongo Henry
Date:
IlI
Reg No: 19/U/19669/PS
 APPROVAL

In accordance with Makerere University policies, this dissertation has been examined and
accepted as a partial fulfillment of the requirements for the Bachelor's Degree of Science
in Actuarial Science.

Signature:

Date:
Mr. Kakaire Grace
Dissertation Supervisor
 ACKNOWLEDGEMENT
First and foremost, I wish to thank the Almighty Lord for the precious gift of life, patience,
persistence and wisdom in pursuing this study. I would wish to acknowledge my loving and darling
parents whom have always been there for me morally and financially towards achieving my academic
success. My sincere and profound gratitude goes to all the lecturers plus my supervisor, Mr. Kakaire
Grace for the guidance towards writing this dissertation May the Almighty Lord bless you all for the
great contribution from you all.

DEDICATION
I hereby dedicate dissertation to the Almighty Lord for the precious gift of life, wisdom and courage
throughout this period. My dearest Mum Mrs. Nakaayizza Sarah, Mum Mrs. Kulabako Juliet and Dad
Mr. Ssekamatte Robert for having never given up on me all time. Special thanks go to all the lecturers
plus my supervisor Mr. Kakaire Grace that enabled I to focus towards the successful accomplishment
of this study.

TABLE OF CONTENTS
DECLARATION ............................................... Error! Bookmark not defined.
APPROVAL .........................................................................................................ii
ACKNOWLEDGEMENT ............................ iiiError! Bookmark not defined.
DEDICATION ................................................Error! Bookmark not defined.iv
TABLE OF CONTENTS.………………………………………………………………………………V
LIST OF TABLES & FIGURES.......................................................................vi
ABSTRACT .......................................................................................................vii
CHAPTER ONE: INTRODUCTION ............................................................... 1
1.1 Background of Study ......................................................................................... 1
1.2 Problem Statement ............................................................................................................... 4
1.3 Research Questions .............................................................................................................. 5
1.4 Objectives of the study……………………………………………………………………………………………………………….5

1.5 Scope of the study………………………………………………………………………………....5

1.6 Limitations of the study…….………………………………………………………………………6

CHAPTER TWO: LITERATURE REVIEW ................................................................. 7

2.1Introduction.…………………………………………………………………………………………7
2.2 Theoretical Framework ..................................................................................................................... 7
2.3 Conceptual Framework ..................................................................................................................... 8
2.4 Insurance and Banking ......................................................................................... 9
2.5 Insurance Penetration ......................................................................................... 11
2.6 Financial Integration .......................................................................................... 11
2.7 Innovation of Products and Services ...................................................................... 11
2.8 Pillars of Bancassurance...................................................................................... 12
2.9 Models Of Bancassurance include: ................................................................................................. 12
2.10 Bancassurance Distribution Channels ........................................................................................... 14
2.11 Merits of Bancassurance ............................................................................................................... 14
2.12Bancassurance and Market Shares ................................................................................................. 17
CHAPTER THREE: RESEARCH METHODOLOGY…………………...19
3.1 Introduction ....................................................................................................... 19
3.2 Research Design.............................................................................................................................. 19
3.3 Sources of Data ............................................................................................................................... 20
3.4 Sample Size & Sampling Procedure ............................................................................................... 21
3.5 Data Collection ............................................................................................................................... 21
3.6 Reliability & Validity Analysis ....................................................................................................... 21
3.7 Correlation Analysis........................................................................................................................ 22
3.8 Multiple Regression Analysis ......................................................................................................... 22
CHAPTER FOUR: ANALYSIS & INTERPRETATION………………….24
4.1 Univariate Analysis ......................................................................................................................... 24
4.2 Bivariate Analysis ........................................................................................................................... 27
4.3 Multivariate Analysis ...................................................................................................................... 28
CHAPTER FIVE: DISCUSSIONS, CONCLUSIONS & RECOMMENDATIONS...... 31
5.1 Introduction ..................................................................................................................................... 31
5.2 Challenges Faced by the Bancassurance Industry .......................................................................... 31
5.3 Conclusions ..................................................................................................................................... 32
5.4 Recommendations of the study ....................................................................................................... 32
5.5 Suggestions For Further Study........................................................................................................ 32
REFERENCES……………………………………………………………………………………………..34

LIST OF TABLES AND FIGURES

Table 1: Variables and their statistics ....................................................................................... 24
Table 2: Bancassurance Products ............................................................................................. 24
Table 3: Banks/Customers that adopted Bancassurance .......................................................... 25
Table 4: Premium Status Statistics ........................................................................................... 25
Table 5: Relationship Btween Premium Policy & Premium Status ......................................... 27
Table 6: Relationship Between Premium Policy & Premium Status ....................................... 27
Table 7: Relationship Between Premium Policy & Class ........................................................ 28
Table 8: Shapiro-Wilk W test for normal data ......................................................................... 28
Table 9: Correlation Analysis................................................................................................... 29
Table 10: Regression Analysis ................................................................................................. 30
Figure 1: A Pie Chart of Class.................................................................................................. 26
Figure 2: A Pie Chart of Premium Status ................................................................................. 26

ABSTRACT
The growth and adoption of bancassurance is one of the most significant changes in the marketing
and financial services over the past few decades. While it could echo like a complex word, it was
coined by simply combining two words bank and insurance. The utilization of Bancassurance
services has facilitated operations around the globe. Due to the cross-border listing of companies in
Africa, Bancassurance has eased the transaction of policies between the main insurance companies as
well as the affiliated companies despite the distance and national restrictions. With the liberalization
of the insurance sector and competition tougher than before, companies are increasingly trying to
come up with better innovations to stay ahead of their competitors. Low insurance penetration is one
of the most notable challenges facing the performance of insurance companies in terms of market
share, product diversification among others. Narrowing down the scope of Bancassurance to Ugandan
Economy, the financial institutions amendment Act, 2016 provides for the introduction of
Bancassurance in Uganda. Bank of Uganda was charged with the formulation of the enabling
regulations to guide the smooth operationalization of the law. These regulations have since been
approved by the Ministry of Finance and gazetted, meaning Ugandan commercial Banks are now in
position to offer Bancassurance to complement their existing bouquets of products.
Therefore, the current study sought to analyze the effect of Bancassurance on the financial
performance of the insurance sector in Uganda. The specific objectives of the study were to determine
the effect of Bancassurance in fire, motor, travel and liability insurance products on the financial
performance of insurance companies in Uganda. Data was analyzed using Stata software version SE
15. Descriptive, correlation and regression analysis were used to identify the relationship between
Bancassurance and profitability of the insurance companies. the data.
 CHAPTER ONE
INTRODUCTION

1.1 Background of Study

Over the past few decades, the insurance sector has experienced several essential changes as regards
to its financial market, through the diversification of products and their marketing in the economy so
as to facilitate their penetration worldwide there by adopting the ideology of Bancassurance which has
promoted competition among the financial institutions. This is mainly due to the ejection of
significant restrictions that previously hampered the horizontal and to a greater extent the vertical
expansion of the insurance sector. Technological progress has increased profitability, facilitated faster
processing as well as monitoring of multiple activities at even much lower cost (Berger 2003). Artikis
et al. (2008) states that the earliest recorded usage of the term “bancassurance” was detected in
France, in the 1980s where its appearance was associated with the development of the consumer and
mortgage credit as well as the liberalization of the financial markets.
Bancassurance refers to an arrangement/ partnership where an insurance company uses a bank’s
sales channel to sell insurance products. It is one of the latest new distribution channels in the
insurance sector leading to enhancement of the insurance business through increase of the clients’
base and the profits/ returns to both banks and insurance companies.
The concept originated from France in the 1980s, though the first recorded settlement of
bancassurance was in 1860, when the CGER savings bank from Belgium started selling mortgage-
linked insurances.
Bancassurance as a concept introduced to Germany was devised as a way for major insurance
companies to enhance their efficiency and convenience in selling their products by securing bank
sales channels. It was then spread throughout Europe plus United States and it has been a successful
model especially in the European countries contributing 35% of premium income in the European
Life insurance market.

The emergency of Bancassurance is one of the most prominent transformations undergone by both the
insurance and financial sectors (Berger and Young 2006), that Elkington (1993) suggests that this
French expression will soon take its place in the Oxford dictionary.
According to Yuan (2011), he defines Bancassurance as the process of selling insurance products
manufactured by insurance subsidies that are owned by banks either through its own distribution
channels or outside agents. Bancassurance also known as “Allfinanza” describes the package of
financial services that can fulfill consumers banking and insurance needs. As a matter of fact,
financial institutions have the capability to offer a combination of both banking and insurance services
at the same time. Banking and insurance are two important integrated financial services that affect not
only individuals and companies, but also have a direct effect on the economic health of emerging
economies (Al-Khalifah, 2018; Claessens, 2014).
Global Scenario of Bancassurance
Bancassurance is a subject of continuing interest to the financial services industry worldwide. Over
the years, regulatory barriers between banking and insurance have diminished altogether, creating a
climate increasing friendly to Bancassurance. The degree to which banks devote themselves to the
sale and servicing of Insurance varies from country to country and among individual banks.
Bancassurance so far has been principally European.
Bancassurance has transformed the Insurance industry in most of the developed world. Bancassurance
represents over 65% of the premium income in life insurance in Spain, 60% in France, 50% in
Belgium and Italy. By making use of existing legislation in Insurance, Bancassurance has provided
them with a new source of profit, which served to diversify their banking activity and optimize their
choice of products, thereby increasing customer loyalty.
Bancassurance also regularly known as Bank Insurance Model (BIM) is the term used to describe the
partnership between a bank and an insurance company whereby the insurance company utilizes the
bank sales channel so as to sell its products (Ngaru, 2004). Bancassurance allows the insurance
company to maintain smaller direct sales teams as their products are sold through the bank to the
bank’s clients. (Jongeneel, 2011).
The financial liberations and innovations have drawn the banking plus the insurance sector together,
down off segmenting the financial sector and spurring competition (Knight, 2000). Therefore,
Bancassurance has increasingly become an accepted standard rather than exception for banks dealing
in insurance products. The emergence of Bancassurance contributed to the overall efficiency, increase
in economies of scale and productivity of both banks and insurance companies.
The drill of Bancassurance within the life insurance industry is most prevalent in Latin America. In
2013, the share of the life insurance policies sold through commercial banks was 44% in Columbia
50% in Chile and 80% in Brazil. In Asia, Singapore and Malaysia have shown how Bancassurance
can figure value for the insurance companies. In China 30% of the new insurance policies sold were
by the banking sector in 2016.

Bancassurance In Africa
As by the African perspective, Bancassurance hasn’t taken off with the same vigor as compared to
European markets. This has been partly attributed to stringed trust relationships between Banking and
Insurance institutions. Unlike lending institutions like banks that entrust their customers upfront with
loans and hopes they will faithfully honor their obligations; customers here have to pay first and hope
that the insurance company shall make good use of their promise while paying claims whenever they
are due. The concept therefore is at its infancy stages to African mindsets with countries such as
Angola, Uganda, Ghana, Cote D’Ivoire, Kenya, Zambia, Nigeria, South Africa, Tanzania and
Mozambique being well-positioned to prosper due to their appreciation in the value of insurance and
the tax incentives that come along with it (Fina cord, 2014), Banks in these regions have not only
increased their size of their branch networks and deposit accounts, but also increasingly adopting
Bancassurance as their future risk-free revenue generator.
On the other hand, insurance companies are reaping benefits as they tap-into a wider physical spread
and hence increasing their clientele-profit portfolios (Jongeneel, 2011).
In the Sub-Saharan regions, South Africa Bancassurance markets are by far too much sophisticated
and mature. This is attributed to the presence of international regional banks such as Bank of Africa,
Barclays, Standard Chartered, Eco bank and insurance companies such as Jubilee insurance, Old
Mutual, Sanlam that have dominated this market (Florido, 2002)

Bancassurance In Uganda
In Uganda, the financial Institutions Amendment Act, 2016 provides for the introduction of
Bancassurance in Uganda. Bank of Uganda was charged with the formulation of the enabling
regulations to guide the smooth operationalisation of the law. These regulations have since been
approved by the Ministry of Finance and gazetted, meaning Ugandan commercial Banks are now in
position to offer Bancassurance to complement their existing bouquets of products. Bancassurance has
remained a low-profile insurance service due to insufficient knowledge, low interest, as well as
deficient technology by the banking sector.
The Insurance Act, 2017 expanded the definition of bancassurance beyond just the arrangement
between the financial institution and the insurer or health membership organization 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 organization 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.
The choice of bancassurance model for the bank is dependent on a variety of factors including the
nature of the bank, size of the market, the regulatory environment as well as customer preferences.

1.2 Problem Statement

Insurance and banking sectors have established Bancassurance as an attractive and often gainful
acclaim to their core businesses. In Uganda, financial sector regulators have agreed on regulations that
will soon see bancassurance become operational despite the protests of insurers.
Regulators and commercial banks sight bancassurance as the sale of insurance products by banks as a
way to increase insurance penetration.
Data compiled by the Insurance Regulatory Authority sources for the past 12 years shows penetration
has been stuck at 0.88%. Insurance penetration in Uganda is among the lowest in the East African
region, compared to Kenya’s 2.93%, Tanzania’s 0.9% and Rwanda’s 2%.
Insurance Regulatory Authority chief executive officer Kaddunabbi Ibrahim Lubega suggests that
Bancassurance will address the low insurance penetration in the country by permitting insurance
companies to tap into the banking sector’s network across the country.
The research focuses specifically on bancassurance with series of remarks in several areas: the
regulatory environment and general importance of banks as an insurance distribution channel, the
insurance product range, operating models and bancassurance partnerships of the ten leading banks in
Uganda and future outlook for the value of the life and non-life insurance market of Uganda through
to 2020. This research can be used in one or more of the following ways:
understand the degree to which leading banks are involved in bancassurance in Uganda,
the policy types that they promote and how they organize these insurance products,
assess the approaches to this activity of Bank of Africa Uganda, Bank of Baroda, Barclays Uganda,
Centenary Bank, Crane Bank, DFCU Bank, Housing Finance Bank, KCB Uganda, Stanbic Bank
Uganda and Standard Chartered, appreciate the regulatory background to bancassurance in Uganda
and the extent to which banks can expand their distribution share of life and non-life insurance in
future,
evaluate other factors that determine whether bancassurance is a viable long-term insurance
distribution option including trends in life expectancy, population age structure, urbanization, political
stability and regulatory quality.
Research about Bancassurance has found out that Bancassurance is frankly related to the components
of financial performance of commercial banks in Uganda such as liquidity, capital adequacy as well as
asset quality. It has also been discovered that Bancassurance is increasingly adopted by banks to
impress and attract their clients. And as a result, clients are also gaining interest in purchasing
insurance policies through banks due to their trust towards banks. To the best of the researcher’s
knowledge, very little has been done on the factors associated with Bancassurance on the performance
of insurance companies in Uganda. Therefore, the study intends to fulfill this research gap by sighting
the impact of Bancassurance on the performance of the Uganda’s life insurance companies.

1.3 Research Questions

This study intends to answer the following research questions:
✓ How efficient is Bancassurance penetration in Uganda?
✓ Has financial integration effected financial performance of insurance companies in
Uganda?
✓ Has innovation of Bancassurance products and services affected financial performance of
insurance companies in Uganda?
1.4 Objectives of the study
General Objective
The general objective of this study is to evaluate the overall impact of bancassurance on the financial
performance(profitability) of insurance in Uganda.

Specific Objectives
To identify the efficiency of Bancassurance penetration in Uganda.
To establish the effect of financial integration on financial performance of insurance
companies in Uganda.
To evaluate the effect of innovation of products and services on financial performance of
insurance companies in Uganda.

1.5 Scope of the study

Bancassurance that basically involves banks acting as corporate agents of insurance companies in
distributing insurance products, has evolved as a pungent distribution channel in many countries.
Following the insurance Regulatory Authority and amendment of insurance laws, banks in Uganda
have trying to take a logical step in the expansion of their business and have schemed into this
profitable segment that has been dominated by a few public sector companies. Thus, Bancassurance
tends to merge banking and insurance with the objective of promoting cross marketing in operations
and synergy in financial dealings. The study as well also examines the performance of insurance
companies as affected by the adaptation of Bancassurance.

1.6 Limitations of the study

The following are the limitations recognized in this research.
1) Only secondary sources of data gave been applied under this study. Primary sources of data were
not applied.
2) Document review observational data collection technique was used in the study.
3) Only three independent variables are analyzed under the study as the measure of financial
performance of insurance companies.

CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
The relevance of the literature review is mostly for the researcher to recognize the research gap,
available data, provide foundation of knowledge on topic plus distinctive methodologies applied in
the field. No empirical research is completed if the previous work has not been analyzed justly by the
researcher. The idea behind this chapter is to discover the areas where work hasn’t been done
previously or may have not been hit justly.

2.2 Theoretical Framework

One of the most significant changes on the financial sectorial markets in Uganda has been the
development of Bancassurance which has often proved a profitable compliment to the existing core
business of the two institutions (Banks and Insurance companies). According to Swiss Re (2008),
Bancassurance is used as a competitive strategy for achieving increased income, reduced fixed costs
and increased customer outreach
Furthermore, the review is vital to know about the extent of exploration in the selected area of
research. Thus, the review emphasizes upon the contribution made by Bancassurance in the financial
performance of insurance companies citing the works of distinct authors outlining disputes for and
against in relation to the study.
Finaccord’s report entitled “Bancassurance in Uganda”: Chitchats about the current state and future
perspectives to 2020, plus the Partner BASE™ and market data file that accompany it, provides
comprehensive and detailed insights into the prospects for bancassurance in Uganda.
The report focuses specifically on bancassurance with commentary in several areas: the regulatory
environment and general importance of banks as an insurance distribution channel; the insurance
product range, operating models and bancassurance partnerships of the ten leading banks; and future
outlook for the value of the life and non-life insurance market of Uganda through to 2020.
Richa Sharma Vyas (2008), in the article entitled “A study of customers perception of
cross selling” author stated that there is a heterogeneous opinion about cross selling, among
customers. In modern marketing, it is a contemporary practice, author has also suggested marketer to
increase bancassurance effectiveness by incorporating element of customers perception in their
experience, cross selling future, author is also of the opinion that if it is implemented properly, it will
lead to highest conversion ratio, or else it will jeopardize customers and firms’ relations instead of
building on it. She also highlighted importance of personal relationship in bancassurance.
Uganda’s financial sector regulators have agreed on regulations that will soon see bancassurance
become operational, despite protests from insurers.
Insurance Regulatory Authority chief executive officer Kaddunabbi Ibrahim Lubega said
Bancassurance will address the low insurance penetration in the country by allowing insurers to tap
into the banking sector’s network across the country.
“Bancassurance will provide revenue growth, channel diversification, offer quality customer care,
quicker geographical reach and creation of brand equity,” said Mr. Lubega.
2.3 Conceptual Framework
Independent Variables Dependent Variable

CLASS

Performance of
Insurance
Companies
Cust_Name
PREMIUM_LCY

PREM_STATUS

Where: Premium_lcy represents premium policy

Class represents insurance policy
Cust_Name represents Bank that adopted Bancassurance
Prem_Status represents premium status either new or renewed policy

2.4 Insurance and Banking

The Ugandan insurance sector has undergone a sea of changes in the last eight years. Most recent is
the allowing of banks to sell insurance product and offer insurance services. According to Mariam
Nalunkuuma the communications officer of the Insurance Regulatory Authority of Uganda six banks
have so far been licensed by the Insurance Regulatory Authority of Uganda (IRA) to partner with
insurance companies to sell and distribute insurance products and services to their clients.
The anchor between the banks and insurance companies is referred to as Bancassurance. There are
currently 29 insurance companies entering into this link with commercial banks for exclusive
bancassurance arrangements. Traditionally, insurance products are sold only through individual
insurance agents/salespersons and insurance brokers accounting for a major chunk of the insurance
business. However, business is changing from just being a service provider or product marketer, to
being innovative. This integrated approach gives an opportunity to different markets, entrepreneurs
and insurers to make arrangements for their businesses to thrive. In this new round of business
competition, innovation is critical for business growth.
Unlike banking, insurance in Uganda is still relatively a trivial part of the financial system, although it
is cultivating steadily in size every year. Intensified contest and changing customer loyalty is prodding
insurance companies to change their business approaches thus becoming innovative day by day and
improving their service delivery to the public.
With a lot of customer expectation as well as making products and services more accessible, the
insurance companies and banks have re-assessed their business models other than focusing on
profitability. It is evident that product choices, behavioral and life-style changes are shifting many
consumer mind-sets. The power shift underway, moving from agents, brokers and insurance
companies to the banks as part of the distribution channels is envisioned to improve the penetration of
insurance services in Uganda.
The combination of multiple platforms in addition to the existing approaches is one way to boost
business ventures in the financial sector. In Kenya for example, the insurance sector is becoming
successful because bancassurance has gained position in its financial market. While licensing, the IRA
requires banks to identify four or more insurance companies to partner or work with. In this win-win
model, the insurance company with their relatively limited infrastructure will be able to sell its
products throughout the country by using banks network, creating a platform for customers to be
explained too how insurance products work.
At the same time, the banks, without investing in additional resources or infrastructure, will be able to
earn a fee-based income, to supplement their core lending activities hence increasing their return on
assets. One of the ways a bank can assume a constant asset base is through fee-based income covering
most of the bank's operating expenses.
Naturally, when a customer visits their bank, it becomes convenient for them to find responses to their
financial needs, including savings, protection against unforeseen life events, mortgage protection,
retirement, risk management and any other professional financial advice. So, with this approach all
will be provided at one spot.
Bancassurance rests on the relationship the customer develops over a period of time with the bank.
Banks, with their existing customer base, and customer loyalty will leverage on their existing
relationships, to convert them into policyholders. It is therefore assumed that insurance products will
gain popularity because they will be sold at different branches which are conversant with peoples'
every day needs. Hence the banks earning commission on the premiums paid by their
clients/customer.
According to Nicholson (1990), the client expects to pay lower prices since the gaining costs are also
low hence the convenience of one stop shopping for fiscal services and products as well as enjoying
better amenities due to the bank’s expanded relationship with its clients.
Finally, any policyholder or bank client prefers to have a unification and delivery of all financial
services at a sole window. Such availability of these services and products relieves them of the efforts
to scout for separate providers. Under this arrangement, clients are also be entitled to getting a share
in the cost saving in form of reduced premium rate and better financial counseling at a single point.

Though still a relatively fresh concept in Uganda's financial system, Bancassurance is a phenomenon
that has been successful in various parts of the globe. The insurance sector will also leverage on the
same since banks are no longer just lending institutions but are emerging as more diverse financial
institutions.

2.5 Insurance Penetration

Studies on the bancassurance shows that the insurance penetration, being characterized by risk
management, increase in market size (growing interaction between insurance companies and
banks), eventually, deciphering into some form of collaboration, synergy and intense competition)
(Szego, 1986), and regulation changes as noted by Saunders (1994) on the relaxation of the
regulatory barriers between banks and commercial firms.
The insurance penetration is complemented by the investigation of the effects of universal banking
on investment efficiency, on banking risk, and on social welfare (John et al., 1994). Furthermore,
Kist (2001) and Flur et al. (1997) affirmed that insurance penetration can be achieved by
integrating insurance, banking and asset management under one provider of financial services.
Regulation change has always required the insurance provider to be stated in regulatory statements.
However, there has been a growing trend of branding insurance products or more commonly
known as white labelling (Burt, 2000).

2.6 Financial Integration

Bancassurance has also been driven financial integration, characterized by market stability were
bancassurers have begun to finely segment the market, which has resulted in tailor-made products
for each segment. The quest for additional growth (sales) and the desire to market to specific client
segments (client relationship) (Benoist, 2002).
On the art innovation of products and services, Bancassurance has seen expansion of product
leading a shift from homogeneous, single channel sales approach to the adoption multiple channel
distribution mechanism. Further the face-to-face contact is preferred, which tends to favor
Bancassurance development. New and emerging channels are becoming increasingly competitive,
due to the tangible cost benefits embedded in product pricing or through the appeal of convenience
and innovation (Kist, 2001).

2.7 Innovation of Products and Services

Innovations in information technology according to Knights et al. (1994) have facilitated increased
and more flexible use of data in service distribution, new product development and increasing
customer base.
Newman et al. (1998) identified that technology and a combination of computers, telephony and
dedicated call centres working in sync has revolutionized sales of car insurance for a branch-based
bank. The internet is facilitating both Bancassurance and Assur finance activities in terms of the
creation of ventures to trade online (Mullineux, 2007).

2.8 Pillars of Bancassurance

Each of the Bancassurance models reposes on mainly three pillars viz insurance company, banks and
clients. For which each has their own objectives for instance, banks could be interested in improved
profitability and non-interest fee income as insurance companies’ interest could be in increased
premium turnover plus volume expansion so as to reach the critical mass while clients obviously sight
convenience and cost reduction. Similarly at times banks may sight diversification of customer
portfolio as well as loyalty and retention of its clients while the insurance companies sight increased
operational efficiency and reduced costs.
Therefore, unless there’s a better congruence amongst all partners in Bancassurance, it can’t prosper.

An Illustration of the 3 pillars:

Insurer Banks Clients

2.9 Models Of Bancassurance include:

➢ Pure Distributor/Agency Model

In this model, the bank acts as an intermediary offering product of more than one insurance company.
They offer more than one company’s product. Insurance companies pay commissions to the bank
which in turn are offset by entry management fees charged to policy holders. The relationship
between the bank and the insurer will also be complemented by a much less significant cross
shareholding. The business assumption behind this model is that banks are unwilling to offer such
expertise internally but are willing to issue policies at a commission (Swiss Re, 2008)

➢ Strategic Alliance Model

In this model, the bank sells products of only that particular insurance company. The main merit to the
bank being able to select the best provider in terms its client profile, quality of products and brand
image. Potential challenges over this model however are that, at low levels of integration both
companies may end up operating as separate entities. Adrian (2003) observed that strong partnership
companies engage themselves in crossholding of equity, made mutual investments and enter into a
long-term exclusive selling agreements whereas in weak partnership may last for few years with
limited mutual efforts. A weak partnership arrangement provides the bank with an advantage over the
insurer since the bank acquires extensive knowledge on insurance business and at the termination of
the agreement; it may have the option of exploring their organizational strategies with the advantages
of a wider customer base.

➢ Joint Venture Model

In this model, the bank participates in product and distribution design of the product. There’s joint
decision making and high system integration for infrastructure utilization. The relationship between
the bank and the insurance companies is reinforced by a balanced strategic share-holding. The main
advantage of this model is that there’s equal partnership and joint decision making. Partners leverage
on each other’s strength while focusing on their core business. The model is best suited for foreign
insurance companies entering new untapped markets by linking up with domestic banks and hence
allows the insurer to leverage on the banks’ presence in the local market (Boyd, 1988).
In this model, the holding company owns both an insurance company and the bank often referred to as
a financial conglomerate. The potential merit of this model is that operations and systems can fully be
integrated. Kumar (2001) added that in this model there’s strong information flow between banks and
insurance companies.
However, the most prevalent bancassurance model throughout the United States, Asia, and Latin
America is Pure Distributor, In Europe on the other hand and most commonwealth countries an
integrated model, with strategic alliances and joint ventures is the preferred option.

2.10 Bancassurance Distribution Channels

The main bancassurance distribution channels are Brokers and Agents (career and salaried) of which
the Brokers have dominated this market for a long time. Uganda has over 2,000 licensed agents
distributed across the 31 insurance companies.
The third channel is the direct business channel where insurance companies acquire customers
directly on their own. Bancassurance is now the fourth distribution channel, and it has proved to be a
very effective channel in a number of countries In Europe, Latin America, Asia and Australia.
Traditionally, insurance was sold only through agency system in most of the countries across the
globe. But with the prevalent progression in consumers’ conduct evolution of technology plus
deregulation, more distribution channels have evolved such as:
✓ E-brokerage, allows users to buy and sell stocks electronically and obtain information with
the help of a website.
✓ Bank employees, banks utilize the insurance company’s expertise in training bank
employees to package and sell new insurance products.
 ✓ Special advisors, Banks plus insurance companies recruit special personnel to advise and
encourage clients upon the uptake of new and available insurance products.
✓ corporate agencies and brokerage firms
✓ Agents, bank act as a corporate agent to sell life insurance and general insurance products.
With the help of this arrangement, both the banking and insurance needs of the customers are
fulfilled at the same time.
✓ Brokers, these are professionals who act as an intermediary between a client and an
insurance company, helping the client find a policy that best suits their needs. Insurance
brokers represent consumers, not insurance companies.

2.11 Merits of Bancassurance

To Financial Institutions
1. Diversification of Customer Portfolio, banks already have a relationship with their
customers selling them an amalgamation of financial products. With Bancassurance,
insurance is added to the mix, diversifying the customer portfolio.
2. Improved Profitability & Non-interest Fee Income, In Bancassurance models, banks
can easily generate risk-free income in the form of the commissions from insurance
companies. Multiple studies have been done in Uganda’s bancassurance context to prove its
positive impact on the bank’s profitability. With bancassurance, banks can cross-sell insurance
products with no increase in their operational expenses. Banks can leverage their distribution
and processing capabilities to achieve profitable operating expense ratio.
3. Customer Loyalty and Retention, Banks enjoy the benefit of being able to provide yet
another product to their customers. Providing integrated financial services strengthens
customer relationships and builds better customer loyalty and retention levels.
4. Increased Customer Lifetime Value, with increased loyalty and stickiness, comes higher
CLV per customer which is a very important metric for banks.
5. Cost-effective Use of Existing Resources, banks use their existing premises and
employees (tellers and branch staff) for the sale of the new insurance products. This means
that there’s no additional cost of operation in selling insurance. They also utilize the insurance
company’s expertise in training bank employees and packaging insurance products. This
reduces the cost of distribution for both insurers and the banks, increasing the channel’s
profitability. Banks also get an increased Return on their Assets.
6. Specialized Training for Tellers and Branch Staff, bank staff is often reluctant to take
on the responsibility of selling insurance, in addition to their regular tasks. This is a major
challenge in bancassurance implementation. Banks address this by taking the insurance
companies’ help to devise attractive incentive plans & providing them specialized training.
So, banks would be able to keep their employees motivated, while helping them broaden on
their skills.

To Banks Clients
• One-stop-shop for All Financial Needs, Bancassurance distribution model allows the
customers to get an amalgamation of other financial services under one roof. Insurance
used to be the missing piece of the puzzle which Bancassurance now completes.
• Improved Application and Policy Processing Time, banks already possess the data
and documentation of customers. This real-time information accessibility makes sure that
the turnaround time is reduced in application processing and claims management. This is
one of the major advantages of bancassurance for customers.
 • Expert Advice, banks sit on mounds of customer data. This, along with insurance
carriers’ expertise in packaging insurance products helps the alliance suggest the right
products. Customers also recognize this expertise, majorly because of their trust in their
banks.

To Insurance Companies
❖ Piggybacking on Banks’ High Market Penetration Rate, on its own, it
would be impossible for insurance companies to reach the market coverage
comparable to that of banks since banks have a magnanimous distribution
network.
❖ Increased Premium Turnover, with increased market penetration, insurers’
motive of increasing premium turnover is also achieved using Bancassurance as
the driving force.
❖ Relevant Offer Generation and Customer Engagement, banks have a
huge amount of data on their customers. This includes their demographic and
financial info, transactional information, spending patterns, credit repayment
history (investment and purchase capability) and more. The carriers and banks
can use this information to forge intelligent engagement workflows and to
customize relevant insurance covers.
❖ Increased Operational Efficiency and Reduced Costs, in several of the
Bancassurance distribution models, bank employees are on the forefront, closing
the deals and taking responsibility. Therefore, the channel proves to have a much
wider reach with much less investment. A similar reach through traditional
channels would need them to hire several hundred agents in different parts of the
country. Through bancassurance, their market penetration goals can thus be met
in a much shorter timeframe than through an agency channel.
❖ Better Customer Experience Throughout the Lifecycle, the entire
process of origination, application processing, underwriting, risk assessment,
fund management, delivery, and claims is managed by the bank. This makes
customer experience seamless and hassle-free because there’s just one point-of-
contact for them.

The advantages of Bancassurance to banks, insurance companies and

customers could be summarized as follows.
Banks earn more profits by selling new insurance products from the existing strong organizations’
resources and structure. The broadening of the products range makes the bank more attractive and can
reinforce customer satisfaction and therefore customer loyalty will be increase. One-stop shop model
optimizes the use of the network and increases the possibility of existing branch network. It increases
the fee income, strengthens long term client relationship and competitiveness pressure.
Insurance Companies, are able to reach more customers through the banking networks. Varieties of
products reduce the risk and increase opportunities. Insurance companies can easily establish
themselves in a new market using a local bank’s existing market. Leverage on bank client
relationship, higher “hit rate” and therefore lower acquisition costs
Customers, are able to acquire better valued insurance products. Save time while accessing all
financial services through a single window or stop shop.
2.12 Bancassurance and Market Shares
The Insurance Regulatory Authority of Uganda (IRA) has published industry performance for the
period April-June 2021 (quarter2) with Bancassurance recording a 54% growth dominated by Stanbic
bank that consolidated its market share to 21.2% from 19.1% between January and March.
According to IRA, the insurance industry registered impressive growth in the first six months of 2021
on account of improved product uptake and interest generating a total of UGX600Billion in gross
premiums.
Bancassurance (Life assurance and other insurance products sold through banking institutions)
contributed 8.2% of the industry’s total business in the first six months of the year. In 20202, the
Bancassurance sector produced UGX32Billion (full year volume) compared to UGX49.3Billion in the
first half of 2021 which represents a 54.24% growth, as per industry report published by the regulator.
For the period under review (April-June 2021) Stanbic bank consolidated its first position by growing
its industry market share from 19.1% in quarter1 2021 to 21.2% in quarter2 of 2021. Stanbic’s bank’s
bancassurance business dominated its rivals in the industry, attracting UGX10.4Billion in total Gross
Premium for the April-June 2021 period. The bank also out earned its peers, raking in
UGX1.91Billion representing 24.4% of all Bancassurance commissions paid for the period under
review.
The bank also dominated Bancassurance for Nom-life (General insurance) product-lines generating
UGX3.5Billion which is equivalent to 28% 0f total industry volumes. Moving forward, Singh Dogo,
Stanbic Bank Uganda’s Head of Bancassurance said that focus will be on gaining market leadership
for the Life insurance business where the lender enjoys 12% market share equivalent to
UGX6.9Billion but 2% behind the top spot holder.
He adds that the bank’s great performance in the second quarter was driven by in general insurance
and credit life business as well as short-term insurance covers for clients. “These are stable, and our
projection is that they will continue to grow on account of their unique positioning to address
customer coverage needs coupled with our assured fast claims service,” Dogo explained.
For the period ahead, Dogo sees Stanbic bank’s Bancassurance efforts focusing on broadening
dominance in individual life products with value propositions on essential services such as Education,
Medical and life insurance policies.
Therefore, sometimes it may look impossible to enter in extremely backward areas by establishing
branches rather it’s a wiser decision to depend on banks. The situation is radically favorable in
developing countries where low penetration of insurance services creates financial insecurity. Thus,
Bancassurance is surely profitable and its implementation completes the understanding of the
business model. The implementation of the same model throughout the world may not be effective as
the specific socio-economic condition of people and society severely impact the business.

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction
The very basic purpose designing a research methodology is to get an idea of the direction of the
proposed research. Its so essential that without it the future of the research may not be recognized.
This process will help the researcher to get a plausible way to conduct the research. Research
Methodology isn’t a single process, rather it is a combination of various activities where each has its
own role to help the researcher complete the relevant task till the end of the process where a
meaningful conclusion is drawn on the observations.
3.2 Research Design
The research design refers to the overall strategy that you choose to integrate the different components
of the study in a coherent and logical way, thereby, ensuring you will effectively address the research
problem; it constitutes the blueprint for the collection, measurement, and analysis of data. The crucial
purpose of a research design is to ensure that the evidence obtained enables you to effectively address
the research problem logically and as unambiguously as possible.
The essentials of action research design follow a characteristic cycle whereby initially an exploratory
stance is adopted, where an understanding of a problem is developed and plans are made for some
form of interventionary strategy. Then the intervention is carried out [the "action" in action research]
during which time, pertinent observations are collected in various forms. The new interventional
strategies are carried out, and this cyclic process repeats, continuing until a sufficient understanding of
[or a valid implementation solution for] the problem is achieved. The protocol is iterative or cyclical
in nature and is intended to foster deeper understanding of a given situation, starting with
conceptualizing and particularizing the problem and moving through several interventions and
evaluations.
The purpose of this research is to study the impact of Bancassurance on the financial performance of
the insurance sector in Uganda. As such the present study has been designed as a “Narrative
Research” and “observational data collection technique” is used as the appropriate data collection
means for the study. Unlike quantitative research where research design is expressed in numbers and
graphs as well as focusing on testing theories and hypotheses, qualitative research is expressed in
words and focuses on exploring ideas and formulating a theory or hypothesis. It is used to understand
concepts, thoughts or experiences. This type of research enables the researcher to gather in-depth
insights on topics that are not well understood.
This approach isn’t free from any kind of limitations. And some of the main limitations are that it's
strenuous to know whether research questions are quality or not because they are all subjective.
Researchers need to ask how and why individuals feel the way they do to receive the most accurate
answers. Furthermore, for internal qualitative studies, individuals may be biased. For instance,
employees may give a popular answer that colleagues agree with rather than a true opinion. This can
negatively influence the outcome of the research study. Therefore, a cautious approach is required
while designing a research study based on qualitative research.

3.3 Sources of Data

Data is the backbone of any data analysis work which is carried on in the research process. Wrong
data selection may lead to misleading results which ultimately may lead to meaningless conclusions.
Data analysis and interpretation work purely on the collection of various data from the sources. Data
is called the unorganized statistical facts and figures that are collected from the respective sources.
The researcher or analysts do the work of data collection for gathering information. The sources of
data can be different depending on the need for the data for the research work.
There are normally two types of data available in the field of research namely;
a) Primary source of data: This is one that has been collected for the first time, happens to be
original and first hand to the researcher. The purpose of collecting primary data should be
aligned with the basic objectives of the research.
b) Secondary sources of data: This is one that has already passed through statistical process.
Ideally secondary sources of data are less costly and less time consuming since such data is
always available in a specific space. The only thing is that the purpose of publication of data
has something else and incase the researcher is using this published and authenticated data
then it may serve the purpose of the research conducted by the researcher.
In this research secondary source of data will be acquired for the collection of data from various
publications plus articles.
3.4 Sample Size & Sampling Procedure
A sample size is the exact number of elements that will be subjected to research questions (Kothari,
2011). Simple random sampling technique was used in the study to determine the number of
respondents. The formula below given by Kothari (2011) was used to calculate the sample size.

(𝑍2 𝑝𝑞)
n= 𝑑2

Where:
n is the desired sample size when target population is less than 10,000
Z is the standardized normal deviation at a confidence level of 95% which is 1.96.
P is the population in the target population that assumes the characteristics being sought. In
this study a 50:50 basis was assumed which is a probability of 50% (0.5)
q is the balance from p i.e., 1-p
d is significance level of the measure, 0.095.

3.5 Data Collection

Data was collected from secondary sources from the various published statistics of the various banks.
The data and information collected from the survey were rearranged, tabulated, analyzed and
interpreted as per the need of the study for attaining the stated objectives. Data analysis was done
using analytical and inferential statistics.

3.6 Reliability & Validity Analysis

Cronbach Alpha (α) was used to measure the reliability of data collection instruments. Cronbach
Alpha (α) is the degree to which an assessment tool will produce stable and consistent results under
similar conditions. Cozby (2001) highlighted that measurements are said to be highly reliable if and
only if they are accurate, consistent and can be replicated from one testing condition to the other. The
theoretical value of α ranges from 0 to 1 with the higher value of α being more desirable. Gorge and
Marlly stated the standard for measuring the reliability of the variables as α > 0.9-Excellent, α > 0.8-
Good, α > 0.7-Acceptable, α > 0.6-Questionable, α > 0.5-poor and α < 0.5-Unacceptable.
All the four questions that were used to collect data have been tested for the reliability using
Cronbach’s Alpha.

3.7 Correlation Analysis

Correlation measures the strength of the linear relationship among the variables. It gives the extent to
which the two variables are correlated and the direction along which the two variables move. Karl
Pearson’s coefficient has been used to find out the relationship between the dependent and
independent variables. The analysis gives the magnitude and the direction of correlation between two
or more variables. The formula to calculate correlation analysis is given below.

𝑛(∑𝑥𝑦)−(∑𝑥)(∑𝑦)
r=
√[𝑛∑𝑥 2 −(∑𝑥)2 ][𝑛∑𝑦 2 −(∑𝑦)2 ]

Where:
r = Correlation Coefficient
n = Number of observations
x & y are the variables

3.8 Multiple Regression Analysis

Regression is the statistical process for examining the relationship among the variables. It includes
many techniques for modeling and analyzing several variables, when focus on the relationship
between a dependent and one or more independent variable. Relations can be nonlinear, independent
variable may be quantitative or qualitative, one can examine the effect of a single variable or multiple
variables either or without the effects of other variables taken into account (Cohen, West & Aiken,
2003). The Analysis used to describe the relationship between two variables is known as simple linear
regression analysis. In case the independent variables are more than one in the study; it is known as
multiple regression analysis. This is used to determine the relationship between one dependent
variable and two or more independent variables. In this study, multiple regression analysis has been
used to predict the dependent variable.
The regression model is presented in the following way.
Y = α + 𝛽1 𝑋1 + 𝛽2 𝑋2 + 𝛽3 𝑋3 + 𝜀0
Where:
Y = Financial Performance
𝑋1 = Bancassurance Penetration
𝑋2 = Financial Integration
𝑋3 = Innovation of Bancassurance products & services
𝜀0 = Error Term
 CHAPTER FOUR

ANALYSIS & INTERPRETATION

Data analysis refers to the systematic processes that condense and make sense of data into
interpretable forms so that relations of the research problems can be studied, tested and conclusions
drawn (Ziebland, 2000)

4.1 Univariate Analysis

Table 1: Variables and their statistics
Variables
Variable Observation Mean Std. Dev
PREMIUM_LCY 565 1551117 5115396
CLASS 565 0.3611 0.8612
CUST_NAME 565 0.2354 0.7964
PREM_STATUS 565 0.6566 0.4752

The above statistic displays the number of observations, mean and standard deviation of the
dependent and independent variables within the data.

Bancassurance Products

Table 2: Bancassurance Products

Bancassurance Products
CLASS Frequency Percentage (%)
0 469 83.01
1 24 4.25
2 36 6.37
3 36 6.37
Total 565 100

The statistic above shows the number people taking on each of the polices in each class with 0
representing Fire, 1 representing Motor Private, 2 representing Motor Commercial and 3 representing
Accidents & Miscellaneous and the percentage of policy intake within Jubilee Insurance Company.
Banks/Customers that adopted Bancassurance
Table 3: Banks/Customers that adopted Bancassurance
Percentage
CUST_NAME Frequency (%)
0 1 0.18
1 512 90.62
2 41 7.26
3 5 0.88
4 6 1.06
Total 565 100

The statistic above shows the number people taking on each of the polices in each bank with 0
representing STANBIC BANK UGANDA LIMITED, 1 representing DFCU BANK LIMITED, 2
representing ABSA BANK UGANDA LIMITED, 3 representing BANK OF AFRICA UGANDA
LIMITED and 4 representing UNITED BANK FOR AFRICA UGANDA LIMITED the percentage of
policy intake within Jubilee Insurance Company.

Premium Status
Table 4: Premium Status Statistics
Premium Status Statistics
PREM_STATUS Frequency Percentage (%)
0 194 34.34
1 371 65.66
Total 565 100

The above statistic shows the status of each of the insurance policies by Jubilee Insurance Company
with o representing a new policy and 1 representing a renewed policy and the percentage of each
premium status.
Figure 1: A Pie Chart of Class
A Pie Chart of CLASS_1
4.25%
6.37% 6.37%

83.01%

Fire Motor Commercial Accidents & Miscellaneous Motor Private

Out of the 565 policies, 83.01% were under Fire insurance, 6.37% for both Motor Commercial and
Accidents & Miscellaneous insurance while the remainder were under Motor Private insurance policy.

Figure 2: A Pie Chart of Premium StatusNo table of figures entries found.

A PIE CHART OF PREM_STATUS

New, 34.34%

Renew
New

Renew, 65.66%

Out of the 565 policies, 65.66% were renewed while the remainder were new policies.
4.2 Bivariate Analysis
Relationship Btween Premium Policy & Premium Status
Table 5: Relationship Btween Premium Policy & Premium Status
ttest PREMIUM_LCY, by (PREM_STATUS)
Two-sample t test with equal variances
Group obs Mean Std. Err. Std. Dev. [95% Conf. Interval
New 194 2385886 498840.4 6948043 1402007 3369765
Renew 371 1114607 195291.9 3761588 730585.6 1498628
Combined 565 1551117 215206.3 5115396 1128413 1973821
diff 1271279 450454 386503.2 2156055

diff = mean(new) – mean (Renew) t = 2.8222

H0: diff = 0 degrees of freedom = 563
Ha: diff < 0 Ha: diff != 0 Ha: diff > 0
Pr(T<t) = 0.9975 Pr (|T| > |t|) = 0.0049 Pr (T > t) = 0.0025
The above statistic shows the different statistics regarding both the new and renewed policies, with a t
statistic of 2.8222, with 0.05 level of significance, we conclude that since Pr (T < t) = 0.9975 is
greater than 0.05, there is no significance, and since Pr (|T| > |t|) = 0.0049 is less than 0.05, there is
some level of significance and since Pr (T > t) = 0.0049 which is less than 0.05, there is some level of
significance, so we reject the null hypothesis.

Relationship Between Premium Policy & Premium Status

one way PREMIUM_LCY PREM_STATUS, tab
Analysis of Variance
Table 6: Relationship Between Premium Policy & Premium Status
Sum of Mean
Model Squares degrees of freedom Square F Prob>F
4.90E-
Regression 2.06E+14 1 2.06E+14 7.96 03
Residual 1.46E+16 563 2.58E+13
Total 1.48E+16 564 2.62E+13
chi2(1) = 102.1728 Prob>chi2 = 0.000
The F-statistic is 7.96, p-value is 0.0049, since the p-value is less than α (0.05), we reject the null
hypothesis. There is a statistically significant difference between the two different groups of the
independent variable, PREM_STATU~1.
Relationship Between Premium Policy & Class
one way PREMIUM_LCY CLASS, tab
Analysis of Variance
Table 7: Relationship Between Premium Policy & Class
Ddegrees
Sum of of Mean
Model Squares freedom Square F Prob>F
Regression 0.0000 3 0.0000 39.95 0.0000
Residual 0.0000 561 0.0000
Total 0.0000 565 0.0000
chi2(3) = 751.4512 Prob>chi2 = 0.000
The F-statistic is 39.95, p-value is 0.0000, since the p-value is less than α (0.05), we can reject the null
hypothesis. There is a statistically significant difference between the four different groups of the
independent variable, CLASS

4.3 Multivariate Analysis

Normality Test
Shapiro-Wilk W test for normal data
Table 8: Shapiro-Wilk W test for normal data
Variable observation W V z Prob>z
PREMIUM_LCY 565 0.3078 260.005 13.44 0
CLASS 565 0.9449 20.691 7.323 0
PREM_STATUS 565 0.9985 0.584 -1.301 0.90331
CUST_NAME 565 0.9577 15.888 6.684 0

Ho: Data follows a normal distribution.

Ha: Data doesn’t follow a normal distribution.
Using 0.05 significance level, we see that PREMIUM_LCY, CLASS_1 and CUST_NAME_1 is not
normally distributed though there’s no sufficient evidence to say that PREM_STATUS_1 is not
normally distributed.
Correlation Analysis
Table 9: Correlation Analysis

PREMIUM_LCY CLASS PREM_STATUS CUST_NAME

1
PREMIUM_LCY

0.3016* 1
CLASS
0
-0.1181* -.4503* 1
PREM_STATUS
0.0049 0

CUST_NAME -0.0656 0.2714* -0.2358* 1

0.1194 0.0082 0

There is a small positive correlation between PREMIUM_LCY and CLASS_1 since the Pearson
correlation is positive (0.3016), that is PREMIUM_LCY increases as insurance CLASS_1 change and
there’s a statistically significant relationship between the two variables since their correlation
coefficient (0.0000) is less than 0.05 level of significance.
There is a negative correlation between PREMIUM_LCY and PREM_STATU~1 since the Pearson
correlation is negative (-0.1181), that is PREMIUM_LCY decreases as PREM_STATU~1 changes and
there’s a statistically significant relationship between the two variables since their correlation
coefficient (0.0049) is less than 0.05 level of significance.
There is a strong negative correlation between PREMIUM_LCY and CUST_NAME_1 since the
Pearson correlation is negative (-0.0656), that is PREMIUM_LCY decreases as CUST_NAME_1
decreases and there’s no statistically significant relationship between the two variables since their
correlation coefficient (0.1194) is greater than 0.05 level of significance.
There is a weak negative correlation between CLASS_1 and CUST_NAME_1 since the Pearson
correlation is (-0.4503*), that is CLASS_1 decreases as CUST_NAME_1 decreases and there’s a
statistically significant relationship between the two variables since their correlation coefficient
(0.0000) is less than 0.05 level of significance and so on.
 Regression Analysis Results

F
R-squared Adjusted R-Squared (3,561) Prob>F
0.0851 0.0802 17.39 0

Table 105: Regression Analysis

PREMIUM_LCY Coefficient Std. Error t P>|t|
CLASS 2263510 386920.8 5.85 0
CUST_NAME -1126393 492466 -2.29 0.023
PREM_STATUS -1399868 450861.5 -3.10 0.002
_cons 412830.6 1409114 0.29 0.770
Independent Variable: Premium Policy
Dependent Variables: Class, Customer Name, Premium Status
In the above statistic, R2 = 0.0851 and the Adjusted R-squared = 0.0802 which means that the
independent variables explain 8.02% of the variability of the dependent variable, PREMIUM_LCY. In
the above statistic the regression model is statistically significant, F (3, 561) = 17.39, P = 0.0000.
Therefore, the applied model can statistically predict the dependent variable, PREMIUM_LCY.
 CHAPTER FIVE
DISCUSSIONS, CONCLUSIONS & RECOMMENDATIONS
5.1 Introduction
Discussions of the main findings of the study was guided by the research objectives. The study further
drew conclusions based on the study findings. Recommendations were made based on the conclusions
and areas for further studies were identified.

5.2 Challenges Faced by the Bancassurance Industry

From the outside, bancassurance may seem attractive and easy to implement, but both banks and
insurance companies face several challenges in implementing it. These include:
Study discoveries revealed that the Bancassurance firms were facing several challenges since its
inception. In Africa cultural and religious points of view, its still a taboo to talk or even contemplate
about death and this makes it quite hard to promote or even sell funeral or last expense policies to
such individuals. The distributor could be perceived as planning for their death.
Macro-economic factors such as inflation and poverty were another challenge hindering the value of
Bancassurance practices in Uganda. Africa’s earnings per capita is generally low with majority of its
population living below the poverty line hence insurance contract may not be a priority.
Lack of institutional confidence in managing Bancassurance affairs was another challenge cited.
There has been growing concern in the past that managers only focus on developing the business as
well as satisfying their personal interests at the expense of the customers. Majority of managers have
been implicated in money laundering schemes and scandals while disregarding the clients’ interests.
The growing trend towards internet banking and mobile banking threatens the existence of
bancassurance. Likewise, the development of new distribution channels could make it more difficult
for banks to sell insurance products.
Mistrust between the two institutions was another drawback highlighted by the study. Banks have on
record been overstating claims. This is due to collusion at the branch levels and the information
shared to the insurance companies may not necessarily depict the right picture on ground. This renders
the insurer to bear high costs in claims settlements and exorbitant law suits by clients through
regulators.

5.3 Conclusions
Bancassurance is very popular worldwide because it is beneficial to banks, insurance companies, and
customers. But certain risks, such as strict rules and regulations for banks/insurance companies, have
made it less popular in some regions. Indeed, many countries have banned such an agreement.
However, as globalization and the relaxation of banking rules has progressed, more and more
countries are adopting this type of coordination between banks and insurance companies for the
mutual benefit of all parties. Therefore, insurance companies who wish to realize maximum
profitability, customer base and cost reduction should consider the concept of Bancassurance. This
goes along with gaining economies of scale at minimum investments (Jongeneel, 2001).

5.4 Recommendations of the study

Insurance companies should provide more life insurance and motor vehicle insurance products since
they have been found to contribute highly to the reported customer satisfaction, growth in customer
base and revenue. A close focus should also be made on the specific life insurance products which is
family life insurance that is favorable to many individuals otherwise the companies may emphasize
their effort in other products which aren’t highly purchased. Given the significant role played by
insurance companies in protecting life of its members, it should be clear to enhance customer
satisfaction at very early stages.
As regarding motor vehicle insurance products which has been found to influence firms’ performance
of the insurance companies in Uganda, more customized product needs to be developed tp cater for
the particular market niche that may want special treatment. Insurance companies should work hand
in hand to see government enforcing motor vehicle insurance coverage. This will help increase the
number of insured motor vehicles. More enticement to the vehicle owners should be included in the
insurance package to help boost the customer satisfaction.

5.5 Suggestions for Further Study

It’s worth reminding the reader that the concept of Bancassurance is relatively new in Uganda. As for
this study predominantly focused on the impact of Bancassurance on the financial performance of
insurance companies, further research needs to be carried out to find out the variability of other
distribution channels other than bank-insurance partnerships including supermarkets, malls plus gas
stations in providing a one stop shopping in addressing the financial needs of its clients.

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