Playing field leveled for all insurers in vehicle premiums
Ethiopian insurance companies usher in the highly anticipated uniform minimum premium policy rate for the motor class of business, as of Tuesday November 1.
It can be recalled that a minimum premium was a major issue for insurance companies because free market competition had hindered their profits and increased their risk, especially in motor and engineering coverage. For a considerable amount of time it was a hotly debated issue amongst insurance companies’ during their general assemblies.
The case was also looked into by the regulatory body, National Bank of Ethiopia (NBE), which finally recommended insurers to come up with the necessary detailed study with implementing indications for the minimum premium.
Since 2017, insurers through the Association of Ethiopian Insurers have been comprehensively conducting the study. Initially they assigned Kenyan based Actuarial Services (East Africa) Limited, while the study was carried out by Zamara Actuaries, Administrators and Consultants Limited, a similar company from Kenya.
On the Insurance Business Proclamation 1163/2019 which was amended in 2019, the central bank has also taken the mandate to issue a directive to determine an economic (minimum) premium rate.
As per the information from different sources in the industry, all 17 insurers have started the implementation of the minimum premium rate that they agreed through their association.
“We have started the implementation as of Tuesday with the new rate for motor insurance,” a branch manager of one of the biggest insurance firms told Capital, adding, “as far as my knowledge all insurers are doing the same, despite some branches trying to go against it by selling products at lesser rates.”
The information Capital obtained from sources indicate that the new move will be officially disclosed by next week.
Experts said vehicle insurance has been a common problem for the profession. Premiums have now reached below 0.8 percent of the value of the car. Insurers say the premiums they charge are small when compared to the damage. From the total claims insurers settle every year, motor vehicles make up the largest proportion. In their annual report they expressed concern about the growing risk of auto insurance.
Experts said that the competition between insurance companies is not based on the service that they provide instead they are pulling the rug out from each other in a race for loss by trying to offer the lowest premium payments.
Ebsa Mohammed, General Manager of Alfa Certification Consultancy, told Capital that the new move will make it hard, particularly for new entrants since the driving force will be service quality and financial capability.
“It is correct that the major share of claim settlement is connected with motor class of business but it is also the major source of premium of insurers. On average 60 percent of premiums come from motor, and some of the insurers have up to 80 percent,” he said.
Ebsa added that new insurers have been competing by price cutting premium rates but now the narrative will change.
However he predicted that the new trend will be good for insurance firms and the nations as well, “I expect quality services like settlement of claims to be on time.”
Endalkachew Zelekew, CEO of Zemen Insurance, signaled that fresh entrants such as his firm might find it bumpy but nonetheless expressed his positivity on the matter, stating, “But we are optimist that we will benefit from the new decision like one of the sector players.”
“We have our own excellence that shall make us to stand in a good position with regards to market competition. We have unique products, different services and working hours,” Endalkachew told Capital.
He said that its necessary to set such kind of instruments to keep the health and service of the sector, “Insurance premium is declining every time but the costs like coverage, labour and others are spiking, which is very challenging for the insurance industry.”
On the other hand, Assegid Gebremedhin, CEO of At Insurance Broker and Consultant, totally stands against the new practice. “This practice will erode the sector dynamism and creativity,” he says, adding, “it may work in Kenya but that does not mean it shall be effective in Ethiopia. Our market is not similar, their service is different and their capability in terms of IT is not the same.”
“Regarding service, new insurers will not compete with long established companies,” Assegid told Capital.
“I am a broker so the new practice will benefit me but it is not proper to set minimum rate, which is damaging the sector,” he added.
“It is like the concept of what the oil cartels did,” he argued.
He said that insures have to maximize their profit and competitiveness by introducing information technology, development of human capital, new policies, expanding on different sectors and differ new market destinations rather than concentrating in Addis Ababa and motor class of business.
“Insurers are not able to win the marketing challenges. Their production is few. They set the rate and fill their budget target by covering very few customers,” he criticized the sector players and reminded that the coming of foreign players will be huge test for Ethiopian insurers unless the business trends are improved.
According to the information Capital obtained, the minimum premium rate is from 1.5 percent to 4 percent of the value of vehicles to the maximum. The four percent minimum rate imposes on public service of cars with seats up to 16, while the 1.5 percent is applicable for private vehicle excluding motorcycle.
UNREAL TO REAL
The human world is currently wallowing in a reality, which is fragile as well as suicidal. The mode of collective human existence that obtains all over the world assumes many things that are not real, i.e. unreal. For a start, the system behaves as if the planetary resources that have made existence tolerable, if not comfortable to the dominant species will still be available for posterity. Obviously, this is a very unrealistic assumption and it is such faulty models that are at the heart of the current global problematic. On the other hand, the parasitic ruling elites of the global order (instead of being creative), it seems, would like to pursue the same old path that only leads to planetary destruction, not excluding human lives itself!
Who is to defend planetary life and life support systems against these well armed, in more ways than one, vicious destroyers? Why do they want to destroy non-replaceable species and the ecosystems that sustain them? These are questions that are not as profound as the followings. What is life all about? What is the very purpose of human society? Enduring and intractable as these queries are, any healthy human being, without trying to be unduly philosophical, still has some inkling about the worth of life. To the majority of humans these inquiries are part of the human spirit and the essence of life, whether one believes in creation or evolution. As a result, the large majority of humanity considers life as sacrosanct, but there are very few individuals who think life is only a means, a mere tool and not an end onto itself! Crass idiots from the ruling elites are increasingly inclined to think that life is something that can potentially be borne of capital and its cohort-the technosphere! Therefore, it is very difficult to debate/discuss spiritual, philosophical, etc., issues with these pathetically demented souls. Therein lies one of the thorny problems of the prevailing world order!
Organized by these callous manipulators and their self-destructive ideology, late modernity is spiraling towards its demise. We admit, life has always been a challenge, since time immemorial. Those concerned with the well being of humanity have always exerted their energy to acquire knowledge and wisdom to help pacify the struggle for survival. Once this was achieved, (at least to a large extent) the parasites/psychopaths moved in to dismantle long established human communities based on shared values that allowed healthy societies to emerge and flourish. The immense achievements that were made possible by the sweats, tears and blood of humane souls have been undermined and hijacked by the selfish breathing beasts of capital! This incursion is more pronounced in the sphere of social existence. Unless the ambition of capital and its wagging tail that goes by the name technosphere is severely constrained, there won’t be much hope about harmonious collective existence. Luckily, some anti-systemic articulators, without the usual mind cluttering biases of the establishment, are coming to the fore. Brian Davey is one of those anti-systemic sensitive souls with formidable analytical prowess who has been diligently deconstructing; we might say rather successfully, the inner workings of the existing predatorily inclined global order. We have tried to serialize a portion of his revealing book ‘Credo: Economic Beliefs in a World in Crisis’ in the recent past.
In our modern world system, systemic thinking is discouraged in favor of ‘specialist’s tinkering’. After all, when someone is initiated to think holistically/universally, one is bound to put things together in a realistic manner. The proverbial phrase ‘connecting the dots’, is used to reveal what is made intentionally obscure and fragmented. Since clarity reveals the 500 lbs. gorilla in the room, with all its glories or shall we say with all its goriest, the unreal narratives that used to dominate discourse eventually give way to the hidden gem- reality! Consequently, reflections and critical introspections about general human predicament end up becoming daily routines of the initiated. Of course, the institutions of the status quo (universities, etc.,) are there to produce capable specialists in the various vocations, so that these individuals will become, once again, cogs in the wheel, so to speak. By and large, these individual are absolute morons when it comes to most things outside of their narrow expertise/preoccupation. Reality is; our planet, water, air, viruses, iron, mountains, women, monkeys, trees, airplanes, tables, bombs, races, beers,…. We hope you got the point. Reality is the amalgam of everything, with no exception! It is not as circumscribed by capital and its human caricatures! Hence, all life and non-life forms need to be respected for what they are, period, nothing more nothing less! The hubris of psychopathic elements is to encourage fragmentation and disassociation within the human family and the reason is quite clear. Once a person’s psyche is closed to reasoning and enlightenment, on the account of systemic disassociation/alienation, he/she becomes a mere pawn in the hands of the powerful!
Morally bankrupt system that is only interested in the now and now, continues to promote a culture of gangsterism rather than a creed of communal renewal, i.e., community based problem solving. One of the nightmare scenarios for the world system rulers is when individuals come together to articulate problems with a view to finding potential solutions within the framework of essential humanity, i.e. addressing everything under the sky; racism, inequality, sustainability, etc. It is not for idle reason ‘surveillance capitalism’ is now all the rage in the circle of global dominant interests. Note; it is not ‘physical distancing’ but social distancing, with all its insinuations that is asked of the global sheeple (human mass) on the account of the declared pandemic. Take notice; tech is now put on a pedestal higher than the almighty!
This editorial was first published in October 2020
