16 Jun 2020

BUSINESS INSURANCE: THE SAFETY NET YOUR BUSINESS NEEDS AFTER COVID-19

According to the business climate survey report by Economic Policy Research Centre (ERPC) on how COVID-19 has impacted on Ugandan businesses, it revealed that business activities in agriculture, micro and small businesses had experienced the largest decline during this period.

No matter the size or nature of the business, the outbreak of the novel coronavirus has in one way or another affected the flow of revenue in all business operations. COVID-19 has disrupted all forms of business supply chains causing significant concerns among business owners and entrepreneurs.

Whereas there has been ease of restrictions, many business owners may not know whether they will survive the post COVID effects with the unforeseen circumstances. Many business operations have different concerns ranging from settling rent dues with their landlords, clearing tax obligations with Uganda Revenue Authority, Kampala Capital City Authority and other respective Local Authorities, to paying off existing business loans and employee wages among others.

Other business operations are in addition suffering from the effects of the current rise in water levels of Lake Victoria and River Nile. Business developments and settlements near the lake like hotels, beaches, and individual houses, schools, health centers, and places of worship have been affected and the government has already identified them as high flood risk areas.

This period has undoubtedly put a financial strain on even tenants at various levels causing a rift with their landlords. It is in such times that any business owner and entrepreneur should consider business insurance as a safety net to protect his/her business against any financial loss incurred as a result of the temporary closure of businesses. For entrepreneurs with business insurance policies already in place, it is advisable to engage your insurer and find out whether the existing policy has been protecting your business from any form of disruption or interruption. If it doesn’t, you may also consider having the existing business insurance policy enhanced so that the business is fully covered and protected against any risks.

The lessons picked from the COVID-19 crisis should be used to shape business survival and resilience plans in the future just in case a similar crisis hits the country and world at large.

Meanwhile, recognizing the increased levels of anxiety, panic, uncertainty and financial challenges many businesses are facing now, the Insurance Regulatory Authority of Uganda (IRA) is working closely with all insurance providers to support the public during this uncertain period.

For purposes of enhancing operational resilience within the insurance sector and to ensure there is continued fair treatment of insurance customers, the IRA has issued various directives and guidelines to the players encouraging them to meet their obligations to policyholders and policy beneficiaries.

Like any other business operation, the cash flow of insurance companies and Health Membership Organisations may be affected by the COVID-19 crisis. So the Authority has tasked the players to take the necessary measures that preserve their business capital positions. In order for these players to ensure that adequate capital resources are maintained and that they are not exposed to liquidity risks, the Authority has guided the players not to issue bonuses or engage in any distribution including payment of dividends save for Deposit Administration Plans and for profit policies.

In addition, due to the restrictions of movement of individuals and there being a likelihood of policyholders finding it hard to intimate and or provide claims documentation within the stipulated reporting timelines, the IRA has guided the industry to extend the claim notification period by policyholders for a period not less than 30 days; exercise utmost good faith and flexibility in accepting proof of claims as well as offer due consideration in determining claims and settle claims promptly.

Important to note is that the COVID-19 pandemic has indeed amplified the need for insurance in enabling the resilience of businesses and individuals. The increasing hardship to businesses and economies has also opened our eyes to have a more sound, stable and developed insurance market.

Mariam Nalunkuuma

Senior Communications Officer

Insurance Regulatory Authority of Uganda

[email protected]