Insurers eye Sh13.5bn boost from new boda boda cover

Insurance companies are set to get a Sh13 billion cash boost from motorcycle operators following Treasury Secretary Henry Rotich’s proposal to make it mandatory for boda boda and tuk tuk riders to procure third-party cover.

Kenyan insurance companies currently price third-party insurance cover premiums for motorcycles at a minimum of Sh10,000 or 10 percent of the value of the motorbike, whichever is higher. With an estimated 1.3 million motorcycles on Kenyan roads, insurance companies could rake in premiums of Sh13 billion annually from the proposed compulsory boda boda cover.

The insurance requirement is intended to cover medical claims and costs incurred in repairing damage caused by boda boda and tuk tuk riders.

Most of the operators only procure insurance at the time of purchase, but fail to renew the covers in subsequent years after the lapse of the initial contract.

While announcing the compulsory insurance requirement in his Budget speech, Mr Rotich noted that boda boda transport has become an important sector in the economy, providing employment to thousands of youths and a convenient means of transport. “Despite the above benefits, this mode of transport has proven to be very risky to the riders, passengers and even pedestrians. The accident victims, who are mostly from the lower cadres of the society, are left to seek financial assistance for treatment from friends and relatives since these boda bodas are not insured,” said the Treasury CS in his June 13 address to Parliament. “To mitigate against these risks, I propose to amend the Insurance (Motor Vehicle Third Party Risks) (Certificate of Insurance) Rules to require all passenger-carrying boda bodas and tuk-tuks to have an insurance cover for passengers and pedestrians.”

An estimated 511 boda boda users died from accidents between January and November last year, a sharp increase from only about 35 fatalities in 2007. Thousands more suffered serious injuries, including permanent disability, as per the National Transport and Safety Authority (NTSA) records.

The highest number of boda boda deaths -- 718 -- was recorded in 2016, with 2015 coming at a second decade-high of 637 fatalities. In an interview yesterday, Association of Kenya Insurers (AKI) chief executive Tom Gichuhi said the compulsory third-party insurance cover will shield motorcycle owners against personal liabilities arising from accidents.

“Every motorised vehicle using a public road is usually exposed to the possibility of being involved in an accident where you hit buildings or another vehicle, a pedestrian, another rider or motorists or where your passenger suffers death or injuries.

“In the event a civil suit is filed against your vehicle, it is your insurance that will cover the hefty accident claims that are imposed by court. Woe unto you if you have to compensate a victim from your pocket as the claims could be of enormous proportions,” he said.

Mr Gichuhi, however, said some boda boda operators working within urban areas already have third-party insurance, downplaying the likely premiums cash boost from the new law. “It is boda boda operators in rural areas who rarely interact with traffic officers that lack cover,” he said.

Changes to Cap 405 Insurance (Motor Vehicles Third Party Risks), he said, were necessitated by the need to include new entrants in the transport sector- motorcycles numbering 1.3 million units and about 284,000 tuktuks.

According to the Insurance (Motor Vehicle Third Party Risks) Act, death and total blindness attracts the maximum compensation of Sh3 million, with other injuries being eligible for claims of between Sh30,000 (one percent) and Sh2.7 million (90 percent). The second-highest payout after death and total blindness is awarded to accident victims who suffer paralysis or urinary incontinence, at between Sh2.4 million and Sh2.7 million. Mild vision impairment affecting one eye attracts compensation ranging from Sh30,000 to Sh450,000.

Speaking in Nairobi yesterday, Boda boda Safety Association of Kenya (BAK) principal Charles Gichira called on insurance companies to sensitise boda boda operators on the different types of insurance policies from the third-party to the comprehensive policies where every operator taking the cover will be assured of compensation in case of an accident.

Secretary-general Kennedy Onyango estimated that the sector contributes about Sh700 million daily to the national economy where each of the 1.3 million motorcycles consumes an average of Sh200 daily worth of petrol while more cash is spent on payment of loans, savings and meeting family needs.

Despite the high number of accidents associated with motorcycles, they remain popular with 2018 recording a 17 percent rise in their registrations to stand at 188,994 compared to 86,434 new registrations in 2017 and 119,724 in 2016.

A total of 1,359,993 motorcycles have been registered in the past decade, with the entire value chain from wholesale and retail trade, repair of motor vehicles and motorcycles employing 258,900 people as at December 31, 2018.

The low cost of motorcycles that retail at between Sh58,000 to Sh130,000 has enabled many, especially the youth, to acquire them. This has attracted several companies to set up assembly plants in Nairobi and Mombasa which import completely knocked down units.

The increase in motorcycles on Kenyan roads has also seen referral hospitals around the country invest in construction of patient admission wards dedicated to motorcycle-related accidents.