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December 17, 2017

Why Probox owners will find it hard to get insured

A Probox involved in a head-on collision along Garissa- Mwingi road on September 9, 2016 / FILE
A Probox involved in a head-on collision along Garissa- Mwingi road on September 9, 2016 / FILE

Kenya Orient has taken the Probox off its underwriting list, a ploy believed to be aimed at minimising losses incurred under the private motor class.

“Dear customer, please note we have stopped underwriting the probox vehicle model with immediate effect,” Kenya Orient wrote in an office notice.

Though Kenya Orient managing director Muema Muindi neither confirmed nor denied the withdrawal, it is evident that the insurer is looking to protect itself from rampant fraud by vehicle owners.

The loss-making private motor business class has been plagued with large number of private car owners who write off their older vehicles to get new ones or exaggerate repair costs to include wear and tear. Others commit fraud by selling their cars or through theft.

Private motor insurance involves protection against accidental loss or damage to vehicles.

Association of Kenya Insurers annual report for the period ending December 2016 shows that Kenya Orient accrued losses to a tune of Sh39.2 million from underwriting private cars. This is only a fraction of the total loss incurred by underwriters under the class, which stood at Sh3.43 billion.

CIC General reported the highest loss in the motor private insurance class at Sh496.62 million, APA (Sh385.34 million), UAP (Sh339.03 million), Britam (Sh326.04 million) and Cannon at Sh311 million.

In September, CIC partnered with the Kenya Motor Repair Association to reduce mounting losses which, according to the firm, were as a result of increased fraud in the sector.

CIC Group chief executive officer Tom Gitogo said that other factors contributing to the high insurance claims in this business class included high spare part prices, the cost of financing the repair process through credit facilities and repeat jobs on poor workmanship.

 “Most companies taking such actions are doing so because of the losses they incur from these vehicles. Insurers are not entitled to cover all classes,” BIMA Intermediaries Association of Kenya chairman Washington Ndegea told the Star.

He said that most Probox owners were taking third party insurance policies but using their cars as public service vehicles meaning that in case an accident occurred, the car owner was entitled to payment.

He added that this was not only impacting the insurers’ profits but was also affecting new business in the case where an insurer did not pay claims to the car owner.

“These are fraudulent claims which are among the main reasons why insurers are making losses especially in this specific business class,” Ndegea said.

In 2015, AIG took similar measures to mitigate their increasing loss ratio through a decision that indicated Subarus and BMWs valued under Sh1.5 million were not credible for cover. 

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