A worker at the garage buffs a car to ensure a perfect paint finish. A
decision by insurance companies to set up car assessment yards to curb
fraud has sparked fury among players in the industry. PHOTO | FILE
A decision by insurance companies to set up car assessment yards to curb fraud has sparked fury among players in the industry.
According
to the firms, motor insurance which accounts for 34 per cent of
premiums, is a significant cause of losses. A citizen has already gone
to court seeking to bar the companies from owning yards.
The 2017 Association of Kenya Insurers report shows that the motor segment was in the loss-making territory.
In
the private motor class, only 11 out of 36 companies recorded a profit.
The overall result was a Sh2.7 billion loss, compared to a Sh3.4
billion the firms lost in 2016.
In the commercial motor
class, 15 companies made losses with the overall result being a dip in
profit to Sh451.7 million from Sh1 billion in 2016.
FIVE FIRMS
CIC General Insurance is among the five firms that have set up yards after its claims ratio payment exceeded 100 per cent.
“Assessors and garages have been exaggerating accident damages,” company MD Elijah Wachira said.
He
added that the establishment of the centre reduced fraud. The firm has
also eliminated a situation where few garages would get most repair
jobs.
“This reduced claims to 72 per cent by June 2018,” he said.
A decision by some firms like UAP Insurance to supply garages with spare parts has also not been received well.
Kenya Motor Repairs Association chief executive Martin Nyakundi said the law does not allow insurance firms to set up yards.
PREMIUM UNDERCUTTING
He
attributed the losses made by the companies to premium undercutting,
“which has resulted in insurance rates declining from 13 per cent in the
1990s to just three per cent”.
Though
assessors are in middle of the war pitting underwriters, brokers and
garages, they say collusion does not occur because they add a 20 per
cent mark up on damages to cater for brokers’ fees.
Motor
Assessors Association of Kenya chairman Albert Muriithi said a majority
of private car owners get their insurance through brokers.
In
case of an accident, the broker is the focal point in ensuring the car
is repaired. Many never want car owners to have contact with the
company.
“Brokers have identified
garages they work with and demand commissions, which are often factored
in the repair of the vehicle. Assessors include a 20 per cent mark up so
that garages can pay brokers,” he said.
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