RE: “BNR cracks the whip as unethical conduct threatens insurance sector” (The New Times, October 18).
From what I have read in the article, there is nothing unethical in what local insurance companies are doing. I am an insurance professional with 18 years of experience and worked in countries where insurance industry is much more developed than it is in Rwanda.
What insurance companies are doing in Rwanda is common practice all over the world. Those companies sell coverage for a consideration (premium). Usually, an insured is supposed to pay full premium upfront in order for coverage to kick in.
However, because not everyone will find it easy to pay full premium at once, the companies provide their clients with various payment options, typically full premium upfront, bi-annual and monthly.
The article also mentioned about price-undercutting. This is also a misunderstanding on the part the regulator. Insurance is a product that can be packaged differently based on the exposure and can, therefore, be sold at different prices due to different exposure faced by the insured’s risk (property to be insured).
For instance, you can have two people insure a similar brand new car with same make and model at different premiums.
Consider this if you want to understand why: A 23-year-old still fresh from driving school buys a 2016 Toyota RAV4. Also a 40-year-old with driving experience of 10 years, and has never been involved in traffic accident, buys the exact model.
Who is more likely to get involved in a car accident? Of course the 23-year-old, as he has not yet developed sufficient driving skills to be able to react quickly in an emergency situation.
Everywhere in the world insurance do not charge same. As for automobile insurance, companies annually have to file their rates with a regulator who will approve or reject the rates if it feels the insurer did provide sufficient justification for the new rates.
The point I want to make is that there is no such thing as price undercutting. Insurance is priced differently than pricing a kilo of tomatoes.
Lastly, no company would want to sell insurance at a giveaway price for the purpose of attracting customers as this would be suicidal. But they can charge lower rates based on the coverage they offer that may be different from those of a competitor, so as to remain competitive in the market, and that is acceptable.
As I stated earlier, insurance companies do not package coverage exactly the same way and not all coverage are compulsory in case of automobile insurance. One insured can buy only the government required coverage, while another can buy extra coverage just for peace of mind.
And, by the way, where are the insurance companies? I keep reading all sorts of things about them but I have never read any article they wrote in self-defence.