Einsurance Brokers Limited

Automobile insurance premiums hit 6-year low

Insurance premiums paid by motorists dropped to a six-year low as vehicles sat idle with drivers staying at home following Covid-19 movement restrictions that also saw claims drop Sh1.1 billion.

Premiums on commercial and private car insurance fell Sh2.3 billion or five per cent to Sh43.1 billion last year, the lowest since 2014 in a drop that hurt insurers earnings last year.

Insurance Regulatory Authority (IRA) linked the drop in premiums and claims to restrictions imposed to curb the spread of Covid-19 like night curfew, lockdowns and push for workers to work from home.

With many fewer journeys taking place during the various Covid-19 restrictions across the country last year, it was inevitable that there would be fewer accidents, thefts and insurance claims. Some motorists also froze paying for premiums because their vehicles sat idle.

“Lockdown was mainly to blame for the decline in premiums,” said Godfrey Kiptum, IRA chief executive.

IRA data shows that motor commercial premiums dropped eight per cent in 2020 to Sh20.2 billion when the government imposed measures to halt the spread of Covid-19, including a halt in movement in and out of five counties seriously affected by the disease.

Private motor vehicle premiums also dropped although at a lower rate of one per cent to Sh22.9 billion as employees were forced out of jobs while others were asked to work from home. The restriction in movement of vehicles, lockdown measures and economic hardships facing car owners also affected vehicles claiming payments for accidents.

Claims made declined Sh1.1 billion or 3.6 per cent to Sh29.4 billion. “The decrease in claims under motor classes of business is mainly attributed to travel restrictions that were in place during the year due to the Covid-19 pandemic,” said Mr Kiptum.

Private vehicle claims declined 8.2 per cent to Sh15.6 billion while commercial motor rose slightly by two per cent to Sh13.8 billion.

Despite lower claims, motor private and motor commercial classes of general insurance business incurred the highest losses in the industry of Sh3.33 billion and Sh2.11 billion respectively.

This was despite a sharp decrease in motor claims in terms of amount compared to the rest of the insurance classes.

This could be explained by a corresponding drop in premiums as public transport was halted in and out of some counties. Private vehicle owners also stayed at home and worked away from their offices during the pandemic.