Accidents on the heels of premium increases : Time to follow through
In less than two months after motor insurance premiums were adjusted, news about an accident involving a bus belonging to a state-owned transport company and a cargo truck at Kintampo was reported.
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Several precious lives were lost; the two vehicles appear mangled beyond repairs and some of the surviving victims were said to be in critical condition and at various health centres seeking medical attention.
While this unpleasant news was still on the lips of many people, hours later, yet another crash was reported at the Sekyere-South District. About 17 people were reported to have sustained various injuries when a minibus and a pickup truck collided head-on.
Typical of Africans, the easiest conclusion anybody could draw at the quick succession of these two accidents was that ‘the gods are angry’ or that some element of superstition was at work.
Sadly and rightly so, many of us may be wondering how the families of these victims are going to make a living if there was no form of compensation after they have lost their breadwinners. Motor insurance claims, death claims, personal accident and medical expenses naturally come to mind. Who pays?
Media should be interested in claims paid
The media have been strong in projecting motorists’ concern over increased motor insurance premiums in the past few months. This is the time for journalists to take the pain to follow up on the claims going to be paid the families of these victims or the surviving ones.
It is instructive to note that the claims figures that may arise from these accidents could bring any insurance company down on its knees, especially if no structured reinsurance arrangements have been put in place previously.
Motorists’ displeasure with increases
The reactions that greeted the revision of premiums can only be likened to the utility price increases. The uproar by various commercial drivers’ unions was imminent, particularly, after they had barely recovered from the increases in utility tariffs.
This may be further justifiable considering the fact that the increment, on the face of it, is astronomical; given the economic challenges and its impact on cost of living.
Besides, as a people, we’re often inclined to spend less but, at the same time, demand more for what we have spent. Commercial vehicle owners, in particular, were concerned about the cascading effects of the premium hikes.
On the positive side, however, the reviewed annual third-party premiums may shift the public’s motor insurance preference towards comprehensive insurance, which has extended benefits with in-built third-party components.
The leap now justified
Undoubtedly, the recent economic challenges are the single most important driver of the recent premium increases. Indeed, about six years ago, when premiums were increased, the cedi was trading at GH¢1.47 to US$1 compared to about GH¢3.9 to US$1 currently in the face of increasing inflation over the period.
With the changes in these economic variables, therefore, importers of vehicle parts, for instance, whose operations are largely denominated in USD, adjust prices accordingly, which ultimately increases the value of claims.
Besides, road accidents and their attendant liabilities have also assumed unprecedented heights, bloating claims under the third party injury, death and own-damage. The consequences of these challenges, if not checkmated, could put the operations of insurance companies in distress.
I am of the firm conviction that the reviewed premiums are imperative for improving both the solvency and sustainability of the industry and the national economy. Currently, available data indicate that the motor insurance portfolio is yielding no profit, while claims in the same portfolio continue to soar, thus threatening the survival of the industry.
I am sure many would recall the whopping GH¢10 million claim that was slapped on one insurance company in favour of one motor accident victim a few years ago. As expected, the public was excited without regard to how the company could raise such an amount.
This, among several other factors, necessitated the ‘mild’ increases which would make it easier for insurers to pay claims much more promptly than before.
The interesting paradox is that while the public appears not to be versed in insurance matters, especially in premium determination and the need to regularly pay the right premiums, a chunk are, however, extremely enlightened in making claims they rightfully deserve.
Moreover, there is a mistaken public belief that since insurance premiums are usually pooled, the pool should necessarily be capable of absorbing all claims. While this may have some merit, for the most part, it is not really the case. In fact, it is only possible for the pool to absorb all claims if the public commits to regularly paying realistic premiums for their insurance.
In this regard, the adjusted premiums will ultimately enhance the capacity of insurers to swiftly attend to claims of vehicle damage, personal injuries and even deaths resulting from accidents.
Alternative cover and mode of payment
Somehow, the public uproar that greeted the new premiums may have been driven, in part, by the difficulty of policyholders paying the bulk premium at once, in the face of the No Premium No Cover policy.
Fortunately policyholders have an opportunity for short-term motor insurance cover, instead of the usual 12-month long cover. Indeed many may not be aware that cover could be taken for even a day!
It is my humble expectation that this alternative could be explored in order to bring greater relief to motorists, especially owners of commercial vehicles.
The way forward
Insurers are being encouraged to continue to educate the public on the reviewed premiums and the benefits they would derive, despite the initial public uproar. Meanwhile, the public must also be reminded that the society is collectively responsible for carnages on the roads, with their attendant huge claims.
The media reportage on accidents and their damage/fatalities must be extended to the attendant claims in order to provide a balanced picture to the public. These few accidents reported provide us the biggest opportunity to do so.
Methinks that a section of the media often overly hype supposed negatives of revised policies, without providing adequate details to the public. Going forward, the media must endeavour to provide the public with adequately balanced information on such policies, focusing on both the costs and benefits to the public as well as the sustainability of the industry.
Finally, for insurers, this could be a test case and the faster claims are paid, the stronger the confidence the insuring public would have in the sector.
Until next week, “this is insurance from the eyes of my mind”.
Writer’s email: [email protected]