LOCAL insurance brokers have challenged insurance companies to justify the proposed hike on premiums for motor vehicles. The brokers said they were not involved in formulation of the new rates.
The proposed premiums are between 3.5 and 9 per cent of total value of the insured motor vehicles, up from the current rates of between 1.5 to 2.5 per cent. The President of the Tanzania Insurance Brokers Association (TIBA), Dr Sebastian Ndege, also questioned the urgency of introducing the new rates without conducting adequate public awareness.
"As brokers we deal directly with consumers and understand the dynamics of the industry but we were not involved in formulation of the proposed premiums. We have also presented counter-proposals to the insurance regulator," Dr Ndege told 'Daily News'.
"We want insurers to come up with data to back-up their bid as to why we should change the current premiums to the proposed rates." Insurance companies have through the Association of Tanzania Insurers (ATI) proposed new premiums to the Tanzania Insurance Regulatory Authority (TIRA) which they want to be implemented from March 1, this year.
However, it is now apparent that the new premiums are unlikely to come into force starting March 1, this year, as industry players are still discussing the proposed rates. Insurers argue that apart from ensuring stability of the insurance industry, the new premiums are aimed at curbing malpractices such as premium undercutting.
However, brokers are of a different opinion, challenging insurance companies to 'clean their house first' as rising premiums alone will not check abuses in the industry. "The best solution to malpractices is adhering to ethics and code of conducts to which ATI and TIRA as professional organizations must emphasize. Pricing will not address the abuses," Dr Ndege stressed.
Reached for comment yesterday, the Commissioner of Insurance, Mr Israel Kamuzora, said that the public will be informed on any development after stakeholders have agreed on the matter. "TIRA will be conducting a number of meetings with industry players this week after which we will issue a statement," Mr Kamuzora explained.
On Thursday last week, TIRA had a meeting with ATI and the Tanzania Truck Owners' Association (TATAO) to discuss the new insurance premiums. Sources in the closed-door meeting have told this paper that no consensus was reached as truck owners insisted on premiums between 3 and 5 per cent.
"It was also agreed during the meeting that the proposed timeframe of March 1, this year should be extended," the source, which preferred to remain anonymous, said. The Chief Executive Officer of African Life Insurance, Mr Julius Magabe, concurred in a recent interview that it is prudent insurers and brokers agree on the new rates.
"It is brokers who deal directly with consumers so there must be a consensus between insurance companies and the agencies," Mr Magabe stated. The CEO complained on the other hand that the motor insurance class is making losses due to price wars and premium undercutting and thus a need for setting minimum premiums.
Last week, Commissioner Kamuzora said the local insurance industry has been operating without a baseline and hence leading to abuses. 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.
The increase will not affect owners of motor vehicles alone given the importance of the transport sector in the economy, according to Executive Director of the Economic and Social Research Foundation (ESRF), Dr Bohela Lunogelo.
"Any increment 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.