Increase in road accidents pose a threat to moto insurance sector
Saturday April 15 2023
Insurance companies have complained of rising cases of road accidents that have subjected them to losses. Picture: File
The sharp rise in the number of accidents has driven up motor insurance claims, increasing exposure to underwriting losses in motor insurance.
The numbers of accidents have more than tripled in the past four years, from 4,653 in 2019 to 17,200 in 2022. According to data from the central bank,6,351 and 14,591 accidents were recorded in 2020 and 2021 respectively.
The problem of low margins insurance players earn from motor insurance has been ] compounded by the significant rise in the price of spare parts. The value of motor claims increased by 18 percent in 2022, as the insurance category continues to expose the sector to risks.
“The number of accidents has been rising, which continues to pose risks to the insurance industry. We are working with other stakeholders to see how this can be addressed in order to avoid this impacting negatively on the sector like what happened before 2018,” said John Rwangombwa, the National Bank of Rwanda governor.
The general claims ratio for the insurance sector, however, reduced from 67 per cent in 2021 to 62 per cent in 2022. Claims in the past years have always hovered around 70 per cent.
According to industry analysts, the reduction in claims was driven by improvement in medical insurance, a product that has in the recent past struggled as insurers accumulated many unpaid claims-a situations which they only turned around after some health facilities boycotted.
“The introduction of a 10 percent copay for all our members is partly responsible for the reduction in claims, it contributed a lot to the reduction of loss ratios in the medical insurance scheme” said Annie Nibishaka, the Managing Director of Old Mutual insurance and president of insurers in Rwanda.
“Last year we engaged our members to educate them about the insurance they have, their limits and how it contributes to the loss ratio they have. We also had private engagement with our service providers to see how and why we should reduce on the cost of medication they are providing to our members, all this contributed” said Nibishaka.
Players have in the past raised concerns about the Rwandan market having no limit to the number of beneficiaries to be compensated in motor insurance like it is the case in neighboring countries.