Insurance premiums too high for Rwanda's transport sector

Sunday February 18 2018

A man walks past buses at a station in Kigali,

A man walks past buses at a station in Kigali, Rwanda. Transporters in the country are finding the insurance premium rates untenable for their business with some considering quitting the sector. PHOTO | CYRIL NDEGEYA | NATION 

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Two months after Rwanda introduced of new motor insurance premiums, transporters are finding the rates untenable for their business with some considering quitting the sector.

Insurance premiums increased by 73 per cent from January 1, with tour operators and bus companies facing the brunt of it.

“The increase was too high and abrupt. It is already affecting our business and some of us could be forced out of business,” said Patrick Kwizera, the director of Fine Safaris Africa.

Mr Kwizera said the increment is disruptive to their business because it was effected after they had given their 2018 quotation, which was based on the previous rates.

“We needed at least a year’s notice in advance for better planning,” he added.

New premiums

In the new insurance premium structure, the mandatory third party policy increased by between 40 per cent and 73 per cent, while the comprehensive package increased from 3.5 per cent of the value of the vehicle to 4.5 per cent.

Most transporters have the comprehensive package, which means their annual premium costs have doubled. They say this is untenable because they still incur other costs for fuel, parking fees, spare parts among others.

The Rwanda Utilities Regulatory Authority (Rura) announced an increase in fuel pump prices starting January 10. Fuel pump prices are at Rwf1,042 per litre for petrol from Rwf1,031 per litre in November 2017.

Diesel increased to Rwf1,005 per litre from Rwf944 per litre in November 2017.

“We currently face increasing operating costs, but the insurance cost is on another level because it was sudden and we did not have time to prepare for it,” said Bayingana Eulade, the proprietor of Matunda buses.

He said before the increment he used to pay premiums of Rwf2.2 million annually for a 36-seater commuter coaster, but he now has to pay Rwf3.8 million annually.

New transport tariffs

The transporters, through their association, have proposed new transport tariffs to Rura, but they are yet to be effected.
The Association of Insurers in Rwanda (Assar) said the decision to increase premiums was reached following a 2013 study that showed insurance companies stand to incur losses if they don’t revise the premiums upwards.

The association said the previous rates had been in place since 2003 and so a revision was overdue.

In the new structure, insurance companies will also not pay for any claim below Rwf200,000. The president of Assar, Gaudens Kanamugire, said the decision was reached after calculating that the insurance process costs more than Rwf200,000 in many cases.

Flexible payment plan

Following complaints from policy holders, insurance companies offered a flexible payment plan for the higher premiums by spreading the increment over two years. However, transporters said the payment plan did not change much.

“Nothing has changed because you still pay the same amount,” said Mr Kwizera.

Senators recently summoned the Minister of Finance and Economic Planning Claver Gatete to among other things explain the increase in car premiums, which they say was abrupt and excessive.

Mr Gatete said the country’s insurance sector is still small and with car premiums being very low, the sector has for the past years been exposed to losses.

There are 14 insurance companies in the country; 10 offer general insurance and four offer life insurance. The sector’s total assets amount to Rwf386.7 billion.

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