Insurers demand fair rates for motor covers

The Association Tanzania Insurers (ATI) has expressed the need for adjustment of rates for motor policies and enforcement of strict regulation and compliance with the law to ensure integrity and credibility of the industry.

"Foul play including rate undercutting and unprofessional deals have undermined the industry and led to hefty losses," ATI Chairperson, Ms Maryanne Mugo said in Dar es Salaam over the weekend.

She said the contribution of motor insurance to the country's non-life business had of late dwindled significantly to 31 per cent in 2011 from 50 per cent some six years ago and as expected for an industry like Tanzania.

This means that despite the fact that more and more vehicles are coming into our roads, the business from motor portfolio is not increasing as would have been expected.

Tanzania National Reinsurance Corporation (TAN-RE) Chief Executive Officer (CEO), Mr Rajab Kakusa, blamed low rates and hefty discounts being given to have made reinsurers decline many low priced covers. He said there were cases where customers got covers that were as low as 1 and 2.0 per cent for trucks, tankers and buses.

"Imagine a 65-seater bus worth 250m/- is given a cover of 2.0 per cent, meaning the premium is only 5m/-. In case of an accident with extensive damage this amount is manifestly inadequate -- you can hardly buy a set of tyres with that money," he explained.

In some cases the charges for a truck or a petrol tanker plying between Dar es Salaam and Lubumbashi or Bujumbura are only 1.0 or 2.0 per cent, despite many associated risks along the route.

The adjusted to 4.25 - 6 per cent rate for commercial vehicles is still low compared to Kenya where it is 10 per cent; Malawi 8.0 per cent and Uganda 8.0 per cent. He said many insurers in the country were now operating at a loss.

Mr Kakusa said since 2006, profitability of the motor business in Tanzania's market started nosediving and between 2009 and 2011 huge losses were registered. He said in 2009, a total loss of 2.6bn/- was registered and in 2010 the loss grew to reach 4.8bn/-, while in 2011 the loss was recorded at 4.1bn/-.

"During this period only six out of 25 insurers generated profit, while others recorded losses," Ms Mugo said. " is imperative for the market to effect appropriate adjustments on insurance pricing to resuscitate the ailing industry," she added.

Ms Mugo added that the players in the market needed to go to the basics, which means adhering to those rates that they have filed with the Regulator.

According to the Tanzania Insurance Regulatory Authority (TIRA) Chief Executive Officer (CEO), Mr Israel Kamuzora, the country's premium market is about 400bn/-, but malpractices such as rate undercutting and other challenges including inadequate skilled personnel are making the going tough and rough.

Insurance stakeholders have commissioned an acturial firm to study the insurance market and their report which is expected early next year is supposed to provide recommendations on rates and other measures to be taken to ensure sustainability of the industry.

Ms Mugo underscored the importance of insurance practitioners to observe ethics and comply with the law in their operations, particularly adhering to insurance principles and sound economic practices. 

Insurance regulations categorically states that the insurance business is founded on the principle of Uberrima fides, a Latin phrase meaning "utmost good faith."

It is a legal doctrine which governs insurance contracts. This means that all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal. This contrasts with the legal doctrine of caveat emptor -- let the buyer beware.

As such all insurance companies registered in Tanzania must declare rates that they are going to charge clients to the Commissioner of Insurance before securing licence to their firms.

This is clearly provided for in the Insurance Regulations of 2009, which states that the Doctorine of Unbertima fides should be the dominant principle regulating the conduct of all insurance practitioners and companies, in whatever aspect or class of insurance they may be engaged in.

"Insurance executives, managers, underwriters, inspectors, loss adjusters and intermediaries must, at all times, put service above self and should always endeavour to employ the most effective and economical ways of doing their business and achieving the legitimate objectives," so says the regulations.

The regulations further direct insurance practitioners to refrain from undercutting one another with a view to securing business.
Source: Daily News, reported by John Kulekana from Dar es Salaam, Tanzania
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