Private car owners set to pay higher premium

NAIROBI, KENYA: Motorists are likely to pay more for car insurance as underwriters feel the impact of higher costs and lower earnings from the high risk private motor sub-sector.

The insurers have blamed the losses they have incurred in that segment to the low premiums charged, despite the high risks involved in underwriting motor insurance.

Since 2002 to date, general insurance companies have only realised profit in 2011 from private vehicle covers. They registered a paltry Sh278.9 million in profit, but the rest of the years earnings remained in negative territories. "When you look at our pricing model for private vehicles, it is not commensurate with the risk involved in the cover," explained Tom Gichuhi, Association of Kenya Insurers (AKI) Chief Executive Officer. "In the last five years, the number of cars on our roads has increased. As a result, accidents have also increased and claims are up. Yet premiums charged remain low," he added. Mr Gichuhi was speaking during the launch of AKI Insurance Industry Annual Report 2015, at AKI headquarters in Nairobi.

Gichuhi blamed fraud as the leading reason insurance companies were making losses on private vehicle covers, and said AKI was formulating a plan to end this. He said that commercial vehicle covers could not be capable of fraud since they involve companies, and that is why insurers were not concerned about profits from that particular segment. "We want to integrate insurance data in such a way that fraudulent claims can be nabbed at the underwriting stage," the AKI boss said. The insurers also said that the other reason why they sought to review up premiums was because younger generation policy holders have shown to be careless drivers and higher risk clientele.