In less than a month, after the Central Bank of Rwanda reviewed upward motor insurance premiums, insurers have agreed on a new percentage to enhance affordability after a public outcry.
On January 1st the treasury announced effectively that all premiums were increased by 100 percent for the mandatory third-party insurance policy and the comprehensive packages.
This increase followed a market research conducted by insurers in 2013 but met with mixed feelings from motorists, at the time when insurers were celebrating the increment saying it would change the sector’s trend of entering into a possible crash due to financial losses and slow insurance uptake.
The Rwanda Association of Insurers (ASSAR) defended that the 100 percent increase would be implemented in two phases to ease the pressure on its clients and enable Rwandans to adapt to the short notice changes.
On Sunday, the decision was revised.
“After several consultations with the insurance association, ministry of finance, central bank and other regulators the premiums will be increased up to 60 percent this year, then a 40 percent in 2019, which will make a 100 percent as proposed by 2020,” said Gaudens Kanamugire, the Chairman of ASSAR during a press briefing on Sunday.
The 60 percent increase this year (phase1) will, for example, affect premium charges on a mandatory third party insurance which will now see a motorbike pay Rwf42,000, cabs, Rwf38,000 and Commuter buses paying Rwf312,000.
This announcement comes after several transporters officially submitted their plight to Rwanda Utilities Regulatory Authority (RURA) about insurance hikes and the agency said it had started engaging stakeholders on the way forward.
Both the ministry of finance and insurers said that the changes in premium prices have been long overdue and not reflecting the current market trends especially the value of the franc, amidst a ‘timely bomb’ which could see the insurance sector fail completely.
Insurers insist that their charges have been lower (80percent) compared to the region and the increase in premium claims, poor underwriting and fraud have made it impossible to sustain the sector which actually makes loses amounting to close to Rwf6billion with a low uptake that is less than 3 percent.
Minister of Finance Ambassador Claver Gatete stressed the need to have the increase, but also said that there was a need to have the general public educated on the developments.
Gatete said that the public outcry compelled the ministry to demand insurers to come clean and explain to the public and the media what was going on.
“The changes are important and even it seems we have to comprehend; it will require some efforts of sensitization and education on the value of insurance, just as we have seen with health insurance experience,” Gatete said reacting to claims that the unprecedented re-visitation of the earlier announcement was not fully prepared.
Some motorists who spoke to KT Press welcomed that shift in the manner of implementation but others sustained complaints over the increase based on the daily incomes.
“We want change but it should be communicated early and in time for us to adjust. The increase will certainly affect our income and this requires the government to increase the fare so we can merge the differences,” said Claude Nsengiyumva a taxi moto operator.
Motorists also said that there is need to simplify premium payment procedures by insurance companies- which is hectic and requires one to hire a lawyer to defend a lawsuit whenever accidents happen, adding to more delays in reimbursement.
Apparently, insurance clients who have already complied with the early increment announcement will either make an adjustment to their premium to get a credit note for renewal or cash refund as soon as possible.
The central bank and ASSAR said in a statement that the insurance sector in general and motor insurance, in particular, have faced challenges including losses driven mainly by inadequate price based on the 2008 standards and high claim ratios.
For example, bodily injury compensation is currently calculated between Rwf2500 to Rwf3000 per day against Rwf500 before 2010.