The newly implemented vehicle insurance policy aimed at third-party risk has raised concerns among industry stakeholders regarding its clarity and the implications of premium and indemnity rates. While some experts support the decision as a necessary step forward, others criticize the lack of transparency surrounding the new regulations.
As vehicle accidents in Ethiopia become increasingly frequent, resulting in significant loss of life and property damage, the urgency for effective insurance coverage has grown. Many victims of road accidents suffer not only physical injuries but also financial burdens, especially when the responsible vehicle is uninsured. In response to this pressing issue, the Ethiopian government has mandated third-party insurance coverage for vehicle accidents.
However, sources within the insurance sector have reported that the recent revision of insurance tariff rates has been unexpected and poorly communicated. A source from the insurance industry expressed concerns about existing loopholes in the law. Previously, the payment ceiling for death claims was set at 5,000 birr, but this has now increased to a minimum of 30,000 birr and a maximum of 250,000 birr. The informant noted that it remains unclear to whom these payments will be disbursed.
Additionally, the new policy has raised fears that customers may opt out of insurance altogether. Previously, the cost to insure a private car was around 500 birr, but it has now risen to over 2,000 birr, potentially discouraging drivers from obtaining necessary coverage.
The new vehicle insurance policy, outlined in Proclamation No. 799/2003, has been replaced by Regulation 554/2024, which sets forth the premium rates and compensation amounts for third-party vehicle accident insurance. Under the revised guidelines, monetary compensation for bodily injury has increased from 40,000 birr to a range of 30,000 to 250,000 birr, while compensation for property damage has risen from a maximum of 100,000 birr to 200,000 birr.
Yared Mola, president of the Ethiopian Insurers Association and CEO of Nyala Insurance S.C., defended the new policy, stating that it was carefully studied by international experts before its implementation. He emphasized that the changes address previous concerns regarding low payment limits for third-party insurance, marking a significant improvement for those injured in vehicle accidents.
Experts agree that the reform is beneficial, as it encourages more individuals to obtain insurance, ultimately allowing companies to profit from the premiums collected. The insurance compensation system is designed to help individuals recover from economic losses resulting from liability, property damage, or bodily injury.
