Tinashe Makichi
Masawara insurance arm, Zimnat Insurance has suspended comprehensive cover for small imported vehicles mainly used by public transport operators.
Such vehicles, commonly known as mushika-shika include Honda Fit, Toyota Wish and Toyota Raum.
The company has also suspended full cover for Nissan X-trail and Honda CRV as their parts are difficult to procure locally.
Masawara Insurance group chief executive Mustafa Sachak confirmed the company’s position but added that comprehensive cover on the selected vehicles was still partly available to selected customers after due diligence.
“We are now only doing third party insurance for those vehicles. Comprehensive cover will only be available to customers after due diligence,” said Mustafa.
Zimnat’s comprehensive cover is the firm’s most extensive and widest form of motor insurance cover. It covers accidental damage to vehicles, third party property damage, bodily injury or death.
Motor insurance is the key driver for the insurance sector accounting for close to 50 percent of the total gross premium written as third party insurance cover is statutory.
The Insurance and Pensions Commission said it was the prerogative of the insurer either to underwrite on comprehensive cover vehicles or to exclude them given the loss ratio statistics of that class of business.
“However, an insurer cannot refuse to insure other vehicles for Third Party cover, which is statutory and the insurer in question has advised us that they continue to offer Full Third Party cover for the type of vehicles in question,” said IPEC in emailed responses to the Business Times.
Underwriting of insurance classes of business is based on analytics around portfolio loss ratios, which means that those types of vehicle’s ratio of total losses incurred (paid and reserved) in claims plus adjustment expenses against the total premiums earned might have been adverse and unfavourable resulting in continued underwriting losses.
When insurance players experience such movements, they tend to exclude risk taking on a case by case and/or increase excesses and exclusions.
“The move by Zimnat may also be as a result of moral hazard-where policyholders deliberately get involved in an accident knowing that the vehicle is insured. Moreso, individuals may insure the type of vehicles and claim that they are for private use but then use them as commercial vehicles or taxis commonly referred to as mushika-shika. The net effect is that the insurance pool for those type of vehicles would not be sufficient to meet the claims which will arise,” said IPEC.
The regulator added that the possible effect again is that innocent policyholders in that insurance pool will be short-changed by those fraudulent policyholders that insure the said vehicles as private yet they use them as commercial vehicles through increased premium rates and rejection of insurance as in this case.
