Rwandan private insurers have narrowed their net written premium losses by 28.6 per cent in the first half of 2018, thanks to the growth in motor-vehicle underwriting premiums.
According to data from the National Bank of Rwanda, the net underwriting losses fell from Rwf4.2 billion ($4.7 million) for January-June 2017, to Rwf3 billion ($3.4 million) in the same period in 2018.
The recovery comes after mandatory third party insurance policy and comprehensive packages were increased by 40 to 73 per cent, and from 3.5 per cent of the value of the vehicle to 4.5 per cent, respectively.
According to National Bank of Rwanda, the motor vehicle claim ratio in the first six months reached 64 per cent, which is above the 60 per cent bench mark set by the regulator.
“One of the issues the insurers raise is that premiums are not sufficient to cover the cost of doing business,” said Moses Nyabanda, a partner at PwC Rwanda. He advised insurers to educate their clients on protecting assets that are eating up industry profits.
For example, a comprehensive motor vehicle insurance costs about Rwf100,000 ($113) annually, but should that vehicle get involved in an accident, compensating the injured occupants is more expensive.
In Rwanda, insurers pay unlimited liability to accident survivors and victims — meaning claimants decide on the amounts to be compensated, which is not the case in Uganda and Kenya, where they have caps. In Uganda the liability is capped at Ush3 million ($786).
In Rwanda, should an 18-year-old sustain injuries in a car accident, regulation requires that they be compensated for the rest of their lives as the assumption is that they would have worked for those years.
The least amount the person is awarded is Rwf3,000 ($3.4) per day. When the Rwf3,000 minimum wage is multiplied by say 48 years, the person can get up to Rwf52.5 million ($59,569) — a figure insurers say is too much.
In addition, insurers say doctored lists of beneficiaries are common. They say it is hard to detect fraud or stop it, as current regulations compel the insurer to pay the claimant immediately a claim is lodged.