Motor insurers are increasingly turning away drivers under 25 to reflect the higher risk younger motorists with powerful cars generally pose to their profit margins. A number of insurance firms admit to doing so due to the mounting loss ratio in the number of accident claims classified as high-risk category, and as a result slapping higher premiums for such drivers simply because ‘their risk profile is known.’
“We call them risk categories. For instance, insurance cover for a younger person with a powerful car will normally attract a higher premium, more experienced driver with a good track record will attract lower premium. It is happening but not on a very wide scale.
“It is something insurers will want to perfect along the way in terms of risk assessment. However, you will need a lot of data and information on people to be able to do that effectively and some are trying but it is certainly a trend for the future,” says Sammy Muthui, managing director of AoN Kenya.
The rising tendency, according to the Association of Kenyan Insurers (AKI) Chief executive Tom Gichuhi, is being caused by “the 25-year-olds Subaru drivers”. He is, however, quick to say the whole idea is not to turn them away, rather it is a choice informed by those obtaining the indemnity.
“No, because everything is insurable. Some companies will not provide cover on high-risk ventures from the get go, while others will opt to insure but using their identifiable premium rate, so it is upon an individual to make a decision on whether to get it or not,” he adds.
Going by the experience, most insurers tend to ‘look harder’ once a motorist hits 25 and they will look even more keenly if the car in question is a speed car or sports vehicle, notably Subaru although most companies do not discriminate against such cars, according to Gichuhi. “It is true because if you find those young people who drive Subaru, their speed sometimes is unimaginable, those ones with double exhaust at the back.
These young fellows want high performance vehicle and then they tend to overindulge in alcohol on Fridays and Saturdays and drive,” he says. Few companies have previously taken precautionary actions in an effort to control increasing loss ratios on auto.
AIG Kenya Insurance, for instance, had in 2015 written to its agents informing them to stop accepting applications and underwriting for cover for Subaru and BMW cars valued below Sh1.5 million, owing to the increasing number of write-offs from the two car brands.
Moses Odhiambo, an auto mechanic based along Nairobi’s Ngong Road, says between two to three Subaru vehicles are towed to his garage on Sundays and Monday mornings after involvement in road mishaps. “Some come with minor knocks while others are pure write-offs,” he says.
AKI now says it is developing a database that will profile all drivers across the country which will capture their claims history and vehicle type, among other information. “We are developing such a database here at AKI which should be ready by December this year, and will profile all the drivers in terms of their claims history, the vehicles they were driving, everything,” he says.
Latest industry report by Insurance Regulatory Authority (IRA) report shows claims incurred by general insurers were Sh45.07 billion in the second quarter of 2017, an increase of 4.5 per cent compared to Sh43.15 billion incurred during the previous year, with motor and medical classes contributing to the huge jump.
ICEA Lion Group, Britam and Jubilee Limited settled combined 27,631 of the 50,780 total claims paid out by the industry for the quarter. A total of 45,036 claims was paid by the industry in quarter four of 2016.