22 August 2014

Kenya: Insurance Firms Face Frequent Checks Over Motor Losses

INSURANCE companies are now being subjected to impromptu inspections by the industry regulator to curb undercutting in motor vehicle premium rates.

This is after private motor vehicle class of insurance registered a massive loss that rose seven times to Sh693.8 million last year compared to 2012 when it recorded a loss of Sh97.92 million.

"Our team of inspectors has been going round and on top of the normal supervision, they are also checking on compliance to all circulars issued by the Authority," said Insurance Regulatory Authority's communication manager Noella Mutanda.

Association of Kenya Insurers executive director Tom Gichuhi confirmed that its members are being inspected without prior notice, a move that has increased compliance levels to the no claims discount introduced by IRA in 2010 to curb undercutting.

"The inspections have put companies on toes because they do not know when they are likely to be inspected," said Gichuhi.

The persistent losses in the motor insurance class has been attributed to undercutting where some companies offer low rates that are not sustainable, with claims surpassing premiums collected.

The NCD principle seeks to reward good drivers by setting the maximum premium rate at 7.5 per cent of the value of the vehicle with an annual decline rate, should a driver go for a year without making any claim. The minimum rate after gradual decline was set as 3.8 per cent of the car value.

Previously, there has been little or no regular checks by the regulator on this matter, resulting in some insurance companies undercutting others on the rates.

In 2013, the IRA issued written warnings to three insurance companies for price undercutting.

An anonymous group of insurers had last month raised alarm over the NCD rule alleging there were still some firms that were openly flouting the rules.

Copyright © 2014 The Star. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.