Vehicle insurance premiums hit Sh54bn on price increase
The state is eyeing a gradual rise in the excise duty on cars running on fuel and also introducing an annual wealth tax for car owners depending on the engine capacity. FILE PHOTO | POOL
Insurers' gross premiums from motor underwriting rose by 14.1 percent in 2022 to Sh53.9 billion as the companies increased premium costs in a bid to cover themselves from losses in the insurance class.
New Insurance Regulatory Authority (IRA) data shows the premiums rose from Sh44.4 billion in a period which saw motorists pay higher premiums by as much as 50 percent.
The higher annual premiums served to partially trim losses from the motor class of insurance, which returned a reduced underwriting loss of Sh7.6 billion from a wider loss of Sh9.5 billion in 2021.
The underwriters’ quest to raise premiums to customers faced initial opposition with the Kenya Human Rights Commission, for instance, filing a petition challenging the legality of the move on a lack of public participation grounds.
In addition to the premium price raise, some underwriters announced they would no longer cover vehicles older than 12 years or with a value less than Sh600,000.
The higher premiums have served to improve the liquidity of motor underwriters to meet claims from customers.
“We have seen an improvement in the motor loss ratios due to the increase in premium which will bring stability in this line of business and also ensure the availability of funds to pay claims,” Jubilee Allianz General Insurance CEO Adja Samb told the Business Daily.
“This is despite the cost of claims going up due to the rise in inflation.”
The motor private category marked the greatest loss reduction at 34.4 percent to Sh4 billion from Sh6.2 billion previously as the motor commercial line saw its loss stretch by 6.6 percent to Sh3.5 billion.
Claims nevertheless remained an Achilles heel on the motor coverage industry with total claims incurred, for instance, rising by 5.8 percent to Sh37.4 billion from Sh35.4 billion.
The increased cost of spare parts has, for instance, raised the cost of repairs requiring the motor underwriters to make higher payments for claims.
Claims paid in the motor class were up 8.1 percent to Sh31.4 billion from Sh29.1 billion in 2021.
Previously the Association of Kenya Insurers (AKI) said the segment continued to report underwriting losses mainly from the result of premium undercutting as insurers battle to keep their market shares.
Most underwriters raised their premiums at the start of 2022 attributing the jump to a surge in claims, some of which were found to be fraudulent.
In the past, insurers have cited fraud in the form of multiple insurance contracts and claim on a single vehicle.
Despite rising premium income, motor underwriters indicate lower claims will be the only route to ensuring the sustainability of the industry as it eyes a return to profitability.
Interventions including road user safety campaigns and partnerships with the government have been tipped to cut road accidents, eventually trimming claims to the insurers.
“A predictable motor insurance class requires addressing avoidable accidents through partnerships with the government as there is no amount of premium that would cover heavy claims from customers,” CIC General Insurance Managing Director Fred Ruoro observed.
At the same time, the higher premiums have driven some motorists out of comprehensive cover as they downgrade to third-party options.
The mandatory requirement to have motor vehicle insurance has nevertheless ensured that absolute subscriptions to motor vehicle insurance have not been dented.
Aware of the premium cost pressures, underwriters have been exploring avenues to lower costs including staggered payments.
“Insurance companies are cognizant of the impact of increased premiums and to make insurance affordable, they are coming up with more and more innovative solutions to respond to all needs and ensure the best quality of service. Some solutions include payment plans such as insurance premium finance where customers pay in as many as 10 instalments,” added Ms Samb.
