EXISTING and soon-to-be owners of motor vehicles should brace for higher insurance premiums starting next month following a proposal by insurance companies towards changing current rates.
Insurance companies, through the Association of Tanzania Insurers (ATI), have proposed new rates to the Tanzania Insurance Regulatory Authority (TIRA), which they want to be implemented from March 1, this year. Stakeholders are expected to meet in Dar es Salaam today to deliberate on the new minimum premium insurance rates before they are implemented.
The increase will not affect owners of motor vehicles alone given the importance of the transportation sector in the economy, according to Executive Director of the Economic and Social Research Foundation, Dr Bohela Lunogelo. "Any increase on the premiums will affect prices of commodities since transporters will pass on the increased costs to consumers.
It is also obvious that transportation costs will increase," the renowned economist told 'Daily News' in an interview. Dr Lunogelo said Tanzanians have had a bad legacy with insurance companies when it comes to compensations since claims take too long to be settled. Nevertheless, "If there is a scientific study which has been carried to ensure that the new rates will be able to promptly settle claims I have no problem.
"The premiums will have impact in the economy but on the other hand they could be welcomed to avoid losses in the economy through closure of business when insurers fail to compensate their customers," he stated. However, Tanzania Truck Owners' Association (TATOA) has threatened to stop transporting goods if the new rates are implemented. The new rates range between 3.5 and 9 per cent of the total cost of the respective vehicles.
"The proposed rates are not reasonable and they will drive us out of business. We will be forced to pay between four to five times compared to what we pay now," TATOA's Treasurer and Spokesperson, Mr Zacharia Hans Poppe, said in an interview with this paper. The Commissioner of Insurance, Mr Israel Kamuzora, argues that the proposed premiums aim at creating stability in the industry by curbing abuses such as premium undercutting by some companies.
"It should be understood that the industry has been operating without a baseline and this has been of concern to re-insurers and potential investors. Introduction of the new premium is at par with other member states of the East African Community (EAC) such as Kenya and Uganda.
"The new rates will bring sanity and stability in the local insurance industry. They will also enable insurers to make prompt compensation after an accident has occurred," Mr Kamuzora explained. For his part, President of the Tanzania Insurance Brokers Association (TIBA), Dr Sebastian Ndege, said his association does not support the proposals in their totality.
"We don't agree with everything in their proposals, as brokers we consider the welfare of the industry and the consumers as well," Dr Ndege said. Dr Ndege did not disclose areas where TIBA is opposing TIA regarding the new proposals but said his association has also presented separate proposals to TIRA for consideration. Commissioner Kamuzora on the other hand, hinted that the new premiums will only be implemented after all interested members have reached a consensus.
He explained further that due to increased road accidents in the country, the motor insurance has been making losses compared to other insurance covers and thus the need for realistic premiums. "I understand that the new premium may not augur well with some players but in the long run the rates will create stability in the industry," he said.
An official with ATI, who did not want to be quoted since he is not the official spokesperson, argued that the proposed premiums in Tanzania are the lowest in the EAC.