Insurance is one of the most common used, read or heard terms in the media or public conversations. It is either one is insuring their property such as buildings or vehicles or indeed buying long-term insurance products, commonly called life insurance.
Insurance is a contract one (the insured) buys to protect themselves or their property against loss. It covers the insured from risks resulting from losses such as damage through fire, floods or road accident. Put loosely, insurance is a contract that gives one peace of mind.
Despite its wider benefits, sadly, very few people know about insurance as evidenced by the low penetration levels in the country pegged at three or so percent.
In fact, it is largely the motor vehicle insurance which is highly subscribed owing to its compulsory nature. In line with the Road Traffic Act of 1997 Section 141 (1) “it shall not be lawful for any person to use or cause or permit any other person to use a motor vehicle on a public road unless there is in force in relation to the use of such motor vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the requirement of this Part.”
Parliament was moved to make motor vehicle insurance to cover the risk of causing damage to property, personal injury to pedestrians or passengers or even death of third parties from use of one’s vehicle on the road.
Motorists who do not comply with provisions of the Road Traffic Act to have insurance on their vehicles risk a fine not exceeding K10 000 or in default two years imprisonment.
Insurance policies enable motor vehicle owners to make claims for repairs or replacement. Where injuries were sustained, or death occurred, the stakes are even higher, hence we have heard reports from the Insurance Association of Malawi that there are syndicates of fraudsters who connive with lawyers, medical personnel and security officers to defraud the insurance industry of millions of kwacha.
This year, insurance companies raised premiums on motor vehicle insurance to cover for the losses. In other words, one can say that the industry pushed its inefficiencies to the consumers i.e. the insuring public.
I call this transfer of inefficiencies because the industry could have handled the issue better through strict scrutiny and probe into the so-called fraud syndicate than punishing innocent consumers. Does it mean that the fraud syndicate will be busted through higher premium? Certainly no! In fact, it will grow bigger as the stakes are now higher.
Personally, I have no problem paying higher premiums. However, I find it hypocritical to be asked to pay more and get a raw deal at the end of the day. For example, I know of and heard of short-term insurance companies which take ages to pay claims filed by the insured. In some cases, the insured have simply given up and changed insurers in the hope of getting a better service or peace of mind, as it were.
Essentially, insurance is designed to give the insured peace of mind. But what is peace of mind when one’s vehicle stay unattended in the repairer’s garage for months on end simply because the insurance company has “not authorized” repairs? What is insurance if the insured have to use “connections” in the hierarchy to fast-track their claims?
False marketing is also rife in the industry. For example, there are companies which claim to have high ratings from rating agencies in terms of swift payment of claims when in reality they are some of the slowest.
It is high time the Reserve Bank of Malawi (RBM), the regulator of the insurance industry, investigated services offered by insurance companies to ensure they match with the pricing.
