Uganda’s insurance regulator is proposing reforms to the sector’s laws to improve compliance and compensation for accident victims under the motor third party insurance (MTPI) scheme.

The reforms by the Insurance Regulatory Authority (IRA) also seek to improve enforcement of workers’ compensation as part of wider efforts to increase market penetration.

Evelyn Nkalubo-Muwemba, the director for legal and compliance at the IRA said the regulator aims to get more employers to subscribe to the statutory insurance.

Currently only a few companies pay workers’ compensation insurance; IRA’s 2013 annual report shows that only Ush14.2 billion ($4.9 million) was paid in the previous year. IRA is working with the World Bank on the project. 

READ: Uganda insurance firms say added tax could slow growth

In their report, the World Bank suggests two ways that insurance providers can choose from before the law is passed. One is the use of a compulsory mobile phone payment system, where the car owner, phone number, and their vehicle are registered.

The other option is to collect the MTPI premium as a fee on the price charged for fuel. The insurance association and the public will choose which option to adopt. 

Valeriya Gothe, a finance and development specialist at the World Bank, said the institution has extended a $300,000 grant to help IRA come up with legal reforms and improve enforcement so as to increase the percentage of car owners paying MTPI.

The money will be used to design a law on MTPI, and to provide mechanisms for catching those who have not paid. Under the current arrangement, police officers have to check for stickers on each vehicle.

Ms Gothe and her team have already conducted a study on how to achieve better enforcement. Government vehicles will also be required to pay MTPI. Under the current law, these vehicles are exempt.

According to Miriam Magala, the chief executive officer of the Uganda Insurers Association, exempting government vehicles from MTPI has affected the growth of the insurance sector as there are many vehicles that are uninsured. In addition, there is no compensation when government vehicles cause accidents.

“When members of the public are knocked down by a government car, they have to sue the Attorney General and sometimes these people are not even compensated,” she said.

READ: Uganda, employers, insurers fail to agree on new insurance scheme

Ms Nkalubo-Muwemba said less than half of the vehicles on Ugandan roads have paid MTPI. The proposed MTPI will compensate every person involved in a motor vehicle accident.

“The people paying MTPI need to be motivated and we can achieve that by compensating them for their economic losses when they are involved in accidents,” said Stephen Kasangaki the commissioner for financial services at the Ministry of Finance.

But insurers are opposed to compensating drivers of vehicles involved in accidents and even some of the passengers.

“Why should insurers pay the price for the government’s failure to enforce the law?” asked Ms Magala.

Some insurers say it is illegal to include drivers and some passengers as beneficiaries of MTPI. Stephen Chikovore the general manager of First Insurance Company Ltd said the cover should not be called MTPI if the driver will be paid even if he is in the wrong.

The insurers also say that in cases where the passengers are employees of a company going to work, workman’s compensation should take care of the accident costs.

The World Bank report recommends that compensating for economic loss must cover all costs incurred as a result of the accident, including medical care, loss of income as a result of absence from work, tools needed to overcome a handicap and future loss of income. This is expected to increase the money given to victims as compensation.

Under the current law the maximum amount, an accident victim can get is Ush1 million ($345). Ms Nkalubo-Muwemba said this only a few people attempt to collect the insurance.

The World Bank report recommends that insurance companies contribute towards a guarantee fund so that in cases of a hit and run, money for the victims is available. But insurers want this part of the law changed to have the government contribute to the fund as well.