Truck Accident 2Most of us are aware that tough economic times and the credit crunch are having a very negative impact on businesses across the globe. These businesses include car insurance companies operating in a very competitive industry where they are already challenged with highly competitive short term insurance premiums.

We might also be aware that the ever increasing number of car insurance claims is a big risk to the sustainability of these companies. But how significant is the risk of poor road safety? I have in the past read with interest the reported financial results of the short term insurance companies in South Africa – and have often found the reference to increasing car insurance claims, industrial fires, natural disasters etc, but seldom a long explanation about the exact impact of car crashes on the bottom-line. I have however over the past weekend found an interesting article on the nature of this risk in Kenya. This appeared in an article on Capital FM Kenya and makes reference to the fact that “Kenyan car insurance providers says road carnage places business at risk”

I would like to quote a few of the observations from this article:

  • Car insurance providers are now calling on the government to step in and curb road carnage saying their business is at risk of major loss.
  • In Kenya 65 percent of insurance claims were from road accidents.
  • Insurers are paying out 105 percent of the premiums collected.
  • If road accidents were reduced by 50 percent insurance claims would reduce from Sh10.3 billion to Sh5 billion thereby making the industry profitable.
  • At the third annual AKI Road Safety Awards ceremony in Nairobi it was said that the impact that road carnage has not only negatively impacted the insurance industry but also the country’s economy.
  • According to the International Roads Assessment Programme, 70 percent of road accidents involved Public Service Vehicles, cyclists and pedestrians.

What can be done to reduce these accidents and risk to car insurance business?

  • AKI chairman Nelson Kuria proposed public education and a concerted effort to curb road accidents and secure the insurance industry.
  • Roads Minister Franklin Bett pointed out that the National Road Safety Council had the requisite capacity to help reduce the rate of accidents on Kenyan roads.
  • Every single road user has been urged to take utmost care and caution on the road.

I have found these revelations from Kenya informative – and a reflection not only of the risks in Kenya but also in the rest of Africa. We will strive to investigate this further and also provide an analysis of the effects of the credit crunch on the car insurance industry and road safety!

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3 thoughts on “How are road accidents affecting car insurance companies?

  1. Doris B Kissi

    Needs article on the effect of motor claims on insurance companies

  2. Doris B Kissi

    Will payment of insurance claims reduce insurance companies capital income?

  3. Kristi Mattocks

    I was involved in an accident a month ago. I drove into the back of a car in traffic. I am not insured but the other car was. The driver said that I would only be liable to pay the excess of his car (which was R4500) and that was our agreement. Then his insurance phoned me and said that I am liable for R11 450 for the entire claim. Is there anything I can do? What does the law say about this?

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