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Uganda’s rising loss ratio signals urgent need for a shift to preventive care to strengthen medical insurance business
Kampala, Uganda | ISAAC KHISA | Uganda’s medical insurance sector has experienced significant growth over the past decade, with gross written premiums increasing from Shs 33.6 billion in 2013 to Shs 196.1 billion in 2023. However, this expansion has been accompanied by a troubling rise in the sector’s loss ratio, which is currently above 100%. This means insurers are paying out more in claims than they are earning from premiums, a trend that is not unique to Uganda but is being observed across many countries in Sub-Saharan Africa.
Loss ratio, or claims ratio, is a critical measure for the insurance industry, representing the percentage of premiums earned versus the claims paid out. A loss ratio above 100% is unsustainable, as insurers are essentially operating at a loss. In Uganda, the loss ratio has risen from 74.7% in 2013 to 109% in 2023, with claims payments growing faster than premium collections. While this situation raises immediate concerns for insurers’ financial stability, it also points to larger systemic issues in the healthcare and insurance sectors that need to be addressed urgently.
The implications of such a high loss ratio are far-reaching. For one, insurers may respond by raising premiums, making medical insurance less affordable for individuals and businesses alike. This, in turn, could result in fewer people purchasing or renewing policies, further reducing coverage in the market, whose current access is only 1% of the country’s 45 million people.
Additionally, insurers may limit the scope of coverage or face financial instability, potentially leading to the exit of companies from the market, which would reduce options for consumers and stifle competition.
According to Sande Protazio, Director of Strategy and Market Development at the Insurance Regulatory Authority (IRA) of Uganda, this rising loss ratio is a cause for concern.
“A loss ratio of 100% or more puts the financial sustainability of insurance providers at risk, as they are not generating enough revenue to cover their claims and administrative expenses,” Protazio explains. “If this trend continues, insurers may face solvency issues, leading to higher premiums, reduced coverage options, or even market consolidation.”
So far, the regulator has seen three insurers under the health membership organization cease operation in the past three years: Metropolitan Life Uganda, which opened shop in 2017 targeting low income earners with micro-insurance products, St. Catherine’s Medicare Limited, and International Air Ambulance.
Several factors contribute to Uganda’s high loss ratio. Rising healthcare costs, including hospital services, medications, and diagnostic tests, are major drivers. As medical technology advances, the cost of treatment continues to increase, putting additional strain on insurers. Overutilization of healthcare services is another challenge, as more policyholders access medical care due to a rising population and increasing health needs. Moreover, the lack of emphasis on preventive care leads to higher treatment costs, as many conditions are diagnosed at later, more expensive stages.
To address these challenges, Protazio says insurers must look beyond traditional cost-cutting measures, such as fraud detection and claims management, and include prevention. He says introduction of preventive care initiatives, including wellness programs, regular check-ups, and screenings, could significantly reduce the incidence of costly medical treatments.
“Insurers can incentivize policyholders to engage in these initiatives by offering discounts or rewards for healthy behaviors such as exercising, eating well, or quitting smoking,” he said.
Protazio says promoting preventive care not only benefits policyholders by improving their health outcomes but also helps insurers by reducing the frequency and cost of claims.
Success stories
Interestingly, this strategy is already showing success in other markets. For instance, Kaiser Permanente in the U.S. and Bupa in the UK have integrated preventive care into their offerings, including regular screenings and chronic disease management programs, which have helped reduce claims and stabilize premiums.
China’s Ping An Insurance Group Company of China Ltd., one of the largest insurance groups by market value, offers health coverage that gives those diagnosed with type-2 diabetes a diet and exercise plan to reduce their risk of complications. Compliance can mean an insurance discount.
In India, insurers like ICICI Lombard use mobile health apps to offer teleconsultations, fitness tracking, and personalized wellness tips, making preventive healthcare more accessible and affordable.
Similarly, in Sub-Saharan Africa, companies like Kenya’s Britam and South Africa’s Discovery Health have pioneered wellness programs that have proven effective in managing loss ratios and fostering better health outcomes for their members.
Research by The Independent suggests that an ideal loss ratio for medical insurance should be between 60% and 80%, allowing insurers to cover operational costs, build reserves for future claims, and offer competitive pricing. A consistently high loss ratio, however, signals the need for corrective measures such as premium increases, cost reductions, or service adjustments.
Insurers in Uganda can also benefit from embracing digital health solutions such as telemedicine, which reduces the need for in-person consultations and helps manage chronic conditions remotely. By promoting such technologies, insurers can further reduce the burden on healthcare facilities and lower claims costs.
The shift towards preventive care is essential not only to ensure the financial sustainability of medical insurers but also to improve the overall health of the population. By empowering individuals to take charge of their health and providing them with the tools to do so, insurers can contribute to a healthier society while also strengthening their bottom lines.
But some industry observers worry about where the closer relationship between insurers and their customers will lead.
“No one ever talks about the negative side,” Duncan Minty, an independent consultant on ethics in insurance told a British daily newspaper, Financial Times. “Because risks do happen, there will be cases where things can go better for the consumer and cases where they go worse.”
However, observers say the lessons learned from successful global and regional examples should serve as a blueprint for Uganda’s insurers. They argue that the adoption of preventive care strategies can transform the medical insurance sector, making it more efficient, sustainable, and better able to serve the population. By focusing on prevention, insurers can reduce the burden of expensive treatments, improve financial stability, and ensure better health outcomes for all.
“… beyond the financial benefits, investing in preventative measures can also improve customer satisfaction. By providing a more comprehensive approach to healthcare, insurers can show their clients that they care about their well-being and are committed to helping them live healthy and fulfilling lives,” says Nabeel Akhtar, the chief growth officer at Hello Doctor, a Pakistan’s Virtual Clinic.
He added: “As a global industry, we need to start prioritizing preventative measures, and we can start by investing in technology, wellness programs, mental health support, and access to licensed doctors and GPs. Together, we can make a difference in the lives of our clients and the future of insurance.”
The observers say the adoption of such initiatives will not only help mitigate the rising loss ratios but also position the insurance industry for long-term success, benefiting insurers, policyholders, and the broader economy.
Uganda’s president Yoweri Museveni has also maintained the need for various stakeholders in health to focus on disease prevention to minimise cost of treatment.
“We need to focus on prevention rather than cure. Adopt healthy lifestyle measures like eating foods rich in fruits and vegetables, exercise regularly, sleep under a mosquito net every night and always wash your hands with soap and clean water,” he said while commissioning the USD$25million 450 bed at Mulago Specialized Neonatal and Women Hospital in 2018.
