Monday, June 3, 2013

Insurance companies yet to agree on the new motor vehicle premium rates

INVESTIGATION An investigation by this paper can establish that intense negotiations  are still going on between the Association of Tanzania Insurers (ATI) and that one of the Insurance Brokers Association (TIBA) over what should be the new motor vehicle premium rate for private vehicles scheduled to start effectively in July this year in the country. It has been learnt. The negotiations follow complaints raised earlier by insurance brokers who wanted ATI to reduce the percentage rate it earlier proposed saying that it was too high for their customers to afford an aspect that is likely to render their business transactions ineffectively. However, the Insurance brokers who conduct insurance business on behalf of insurance companies want it to be lower than what the ATI association has proposed. The newly proposed motor premium insurance rates are yet to be made public, but sources revealed to this paper that, ATI wants the initial annual insurance rate be raised to over 6 percent of the vehicles value. The current initial annual rate is 5 percent of the vehicle’s value.  An official from Insurance group of Tanzania Ltd who preferred to remain anonymous said last week in Dar es Salaam in an interview that, the two associations have been holding several meetings since February this year to review the current rates and are yet to reach a conclusion. He said that once agreed, the two associations will issue the report for approval so as to effectively start in July this year.   Speaking on behalf of ATI’s General Manager Mathew Mahundi, an official of the association who asked for anonymity when contacted for comments put it clear main reasons behind the move and said that, it was meant to compensate for the great loses which occurs to damaged vehicles caused as a result of increased accidents in the country.  He said other loses occurs due to various damages including car theft, and added that this has made the motor insurance covers to be the leading category of all insurance premium covers that spends huge sums of  money for compensation to clients in the country. In view of this, ATI association is intending to increase the rates so as to compensate the increased losses which have been occasionally reported by their clients now and then. In mid February this year, ATI association made a joint public notice regarding the increase of motor insurance premiums by Tanzania Insurance companies and rates adjustments which are scheduled to start effectively in July this year. It also analyzed reasons as to why the new rates are to be introduced. A statement was quoted as saying that, for the past three years (2009-2011), the Tanzania insurance industry had experienced a negative performance in the general insurance business. In 2010, the industry recorded an underwriting loss of Sh. 20.43 billion out of which motor insurance accounted for Sh. 4.8 billion and in 2011 the loss increased to Sh. 8.34 billion with motor insurance contributing to Sh. 4.2 billion. The statement further said that, for 2012, the loses are projected to reflect a worse performance. The combined ratios for the last three years have been 99 percent, 102 percent and 106 percent for 2009, 2010 and 2011 respectively. However, despite of all these, the statement has further praised the Tanzania Insurance industry saying that it is still profitable when investment income is added back to the underwriting results.  The statement quoted number of factors that have contributed to the poor underwriting results and the major ones are age of vehicles, increased motor vehicles and number of accidents and public insurance awareness leading to increase in claims trend by third parties. Other causes are attributed to be due to increase in cost of spare parts and standard of living, high rates of inflation and the reinsurance cost to insurers. This trend indicate a potential disaster to the insurance industry and the overall national economy and so it was found imperative for the market ton effect appropriate adjustments for insurance pricing to resuscitate the ailing insurance industry, reads part of the statement.

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