General insurance prices are set to come down albeit temporarily based on engagement between the Central Bank and players through Association of Insurers’ Rwanda (ASSAR). The local insurers engaged in general insurance business, which involves non-motor and non-health coverage, increased their premiums in December 2020. The association based the price changes by a 2018 actuarial study on non-motor prices which cited underpricing of insurance premiums. As a result, insurance prices for non-motor and non-health coverage across the market went up as clients have been realizing when renewing their premiums. The price revision being done by all firms led a section of clients to accuse local insurers of cartel-like operations where pricing and business approach is on the basis of a unanimous agreement as opposed to market forces. The New Times has however established that the Central Bank, the sector regulator, is currently in engagement with the players to find a ‘smoother’ transition to ensure that premiums are not underpriced, the jump in cost is not unbearable for clients. Central Bank Governor, John Rwangombwa said that while they do not regulate pricing of insurance products, they have engaged the sector players over the past months and are jointly set to announce a gradual price increment as opposed to a full increment announced in December 2020. He said that their engagement is on the basis that while it’s understandable of the need to restore market prices from the previous undercut prices, it should probably be done gradually. The governor said that the general insurance troubles can be traced back to competition malpractices in previous years characterized by price undercutting in an attempt to win and retain clients. This saw the sector revenues eroded below levels of business sustainability. He said that in an attempt to address negative competition tendencies, players came together to undertake an actuarial study to establish the right pricing. Probably out of fear of losing out clients, most priced their premiums at the minimum prices jointly set. This, he said, led them to come off as a cartel. “Unfortunately as it happened in 2018 when they increased the motor insurance premiums, as they had eroded their revenues, they brought back all costs at once without much engagement to their customers,” he explained. Speaking on behalf of insurance players, Denise Rwakayija the Managing Director of Rwanda Insurers Association told The New Times that negative competition amongst insurers led to underpricing forcing the rates to go down in the past years. “Insurers realized that the trend was a bad practice and affecting product viability. They committed to reverse the negative trend going back to normal,” she said. “As an example, it is unimaginable for a customer to think that an asset of Rwf6bn would be fully covered by a premium of Rwf1m. Insurance risk spread involves a minimum of four players taking a portion of risk and correspondingly taking a portion on the premium paid. For this operation to be properly structured, a standard pricing must have been calculated and applied,” she said. The gradual price increase is a relief to a majority of insured especially homeowners and businesses. The December 2020 price review had seen the prices increase by as much as 50 per cent for homeowners and up to 100 per cent for businesses. Previously, the insurers have come together to attempt to drive up prices for their services. In January 2018, the association announced an increase in insurance premiums by up to 73 per cent for private and public vehicles. Following public outcry, the association agreed to increase in two phases at 60 per cent and 40 per cent.
