Ignorance costing motorists insurance benefits

 

 A truck at Malaba. Ugandan sugar traders suffered most when Kenya banned the commodity’s imports. PHOTO BY STEPHEN OTAGE. 

By Faridah Kulabako

Posted  Tuesday, March 12  2013 at  02:00

In Summary

Clouded by ignorance. Many motorists do not know why they pay Motor Third Party thus loosing compensation benefits.

Despite paying Shs15,000 in annual charges for the mandatory motor third party cover, Jeremiah Kintu, a boda boda cyclist doesn’t know why he pays the fees or how he is supposed to benefit.

Every time he has had an accident the case is mutually settled with an agreement between the two parties to have a spot on settlement.

To him, the motor third party cover means being free of interruptions from enforcement officers while on the road.

Not known to Kintu and many others, however, is that the annual fees paid to insurance companies are meant to help them cover third party risk- related liabilities they incur in case of an accident that results into bodily injury or death of a third party involved.

Unlike Kintu who compensates his victim, others run off after injuring victims even when they have up-to-date third party insurance covers.

Such a state of affairs is attributed to ignorance, which stakeholders say costs motorists millions of shillings annually, after paying for a service whose benefit is hard for most of them to understand.

Motorists pay annual premiums ranging between Shs14,000 and about Shs400,000 depending on the motor cycle or vehicle type and usage.

Statewide Insurance Company managing director, Mr Joseph Kiwanuka says being a compulsory policy, most motorists buy it without understanding why and for what benefit.

In addition, he says, others value their time against the victims and thus tend to get short cuts in solving the problem which in the end turns out to be costly on their part.

Mr Latimer Mukasa, the Uganda Insurance Brokers Association chairman echoes a similar argument, saying public awareness is still a big challenge for the industry.

The motor third party cover is a compulsory fee for all motorists introduced under the Motor Vehicle Insurance Act 1989 as a social protection law to cover the insured person for any claims made by a third party.

The law requires that the policy holder reports to police and to the insurance firm in case of an accident and should also provide all the other necessary documents to enable the insurer compensate the victim.

What is required

The victim on the other hand is required to provide police accident and medical examination reports to be compensated.

In case of death, a post mortem report, letters of administration issued by a court and letters of introduction from the local council of the deceased’s area of residence should also be provided.
The law provides that the victim is compensated to the tune of Shs1 million.

To the majority of motorists, however, insurance companies take the advantage of the policy being compulsory to sell it to them without explaining what its relevance is, something they view as a means of exploiting them.

The inability of majority of motorists to see value for insurance services is partly responsible for the low penetration levels – currently at 0.6 per cent.

Mr Kiwanuka notes that unlike in the developed world where one thinks about insurance before anything else, in Uganda having an insurance cover comes at the bottom on one’s expenses priority list.

“In Uganda if a business begins to dwindle a little, the first thing one scraps off the expenses list is insurance, forgetting that in case of any tragedy, he can lose everything without any compensation,” he says.

Mr David Tumuhaise, Uganda Insurers’ Association (UIA) technical manager agrees that the policy’s social benefits are yet to be understood by majority of motorists and some insurers.
He, however, says all possible ways are being explored to increase awareness.

The associations’ chief executive officer Ms Miriam Magala says as a means of increasing awareness and ensuring effective communication, players have been urged to translate all communications into local languages and simplify policy documents.

It is also said that victims who tend to follow up cases for compensation are not receiving fair redress and compensation due to the lengthy and tedious processes they have to go through before payment of claims.

For instance, Barnabas Katwere who was knocked by a motorist who referred him to his insurer for redress said despite providing all the required documents to the insurer, he was never compensated.

“I sustained injuries and had medical reports to prove it but the process dragged on. The last time I visited the insurance firm I was told that the injury was minor and was never compensated,” Barnabas Katwere said.

However, Ms Gugu Ngwenya, First Insurance Company general manager insurers pay all genuine claims, before adding that the process is at times slowed by delays on the part of other stakeholders.

 “People must realise that the process is long because they have to get letters of administration and that is a process in itself. Those letters are not coming in quick enough,” he explains.
IRA chief executive officer, Mr Ibrahim Kaddunabbi Lubega, however, says the low compensation limits - Shs1 million –discourage people from following up the claims.