Insurance companies are charging an additional Rwf 200,000 from clients in order for their insurance cover to apply when their vehicle is involved in accident, says report of parliament.
For clients with Full Coverage auto insurance policy, which means the cover pays for anything, before the insurer starts the process to pay for the reported damage to your car, you are required to pay a non-refundable fee.
The Lower Chamber’s committee on economy and budget conducted a review of the insurance industry and submitted the report yesterday to the full House.
“Since the client is asked to pay that amount of Rwf 200,000, Full Coverage auto insurance policy loses meaning,” said Munyangeyo Theogene, the committee chair.
He said that in case the damage on the car was equavalent to Rwf 200,000 or less, the insurance company will not pay anything. Instead, he added, the insurer will use that advance payment to cover the damage.
Motor insurance premiums have been at the center of a long protracted war between government and the insurance industry.
Up until early last year when government agreed to increase premiums, it was difficult to get insurance firms to pay up after accident. The companies maintained that due to very low premiums, they were not making any money.
On May 6 this year, the National Bank of Rwanda’s Financial Stability Committee reported that insurance firms earned profit of Rwf 9.3bn, up from Rwf 7.2bn during the previous quarter.
The sector profits rose partly due to the “improved performance of the motor insurance product”, said Central Bank Governor John Rwangombwa at the time.
In January 2018, the The Association of Insurers of Rwanda (ASSAR) increased insurance premiums by up to 73 percent for private and public vehicles.
The hike provoked fierce public outcry. The association backed down, and agreed to increase in two phases at 60 per cent and 40 per cent later.
The last 40 per cent increment was supposed to take effect in January this year. However, the Central Bank said in February that it had commissioned a fresh study before deciding on the modalities of the final increase.
It is from this stage that Parliament has now come into the picture.
In the House yesterday, the committee chair Munyangeyo accused insurance companies of not appreciating what has been done for them so far by reviewing premiums.
“The insurance companies are doing good after we reviewed the
laws, but it is clear that the changes are not favouring clients,” said Munyangeyo.
The report also accuses insurance companies of monopolistic practices such as coinniving to set premiums which discourages new firms from coming into the sector.
Parliament adopted that the central bank engages the sector players to determine the need for the upfront pay obtained from clients.