In an exciting collaboration between Minet Malawi, Britam, and The Daily Times - Malawi's leading newspaper - we are thrilled to introduce a groundbreaking initiative that will redefine your Wednesdays. Welcome to the Insurance Insights Column – a weekly rendezvous with the world of insurance and contemporary issues that matter. Every article aims to illuminate the intricate landscape of insurance products and relevant topics that impact us all. The articles are educative at all levels, catering to both practitioners and non-practitioners.
As published in The Daily Times (Malawi) on November 20th, 2024
Private research that I conducted on insurance density accorded me an opportunity to visit Malawi’s gateway points of Songwe, Dedza and Mchinji. By our standards, the three are busy border posts. Trucks, bearing foreign and local registration marks, of different make and model, loaded with wet and dry cargo, enter and exit the country continuously. Unregistered - without local number plate - small vehicles are also a common sight.
Steering through today’s turbulent economic environment requires experience and understanding of business norms. With increasing demand for higher sales and the need to reduce operating costs, the insurance industry’s challenges have never been small. The scarcity of foreign exchange and fuel, for example, is sine dubio exacerbating the fraternity’s problems.
To try to get out of the problem, businesses, including insurance, devise and adopt different strategies. Unfortunately, not all prescriptions are congruent to the problems at hand. Some practices are making the industry to soften, others to harden. It is akin to firing in the dark. This is what I came across during my recent sojourn to the border posts.
The country’s Road Traffic Act requires that there should be an insurance policy against third party liabilities for any motor vehicle constructed for use on a public road.
The intention of the Act is to ensure that motorists should have funds readily available for legal liabilities to pay damages arising out of death, injury and property damage belonging to third parties.
Before 2006, it was required that all motorists carry with them policy document every time they drive on a public road. This was tedious. Nowadays, insurers issue a small document, called disk, for motorists to display on windscreen. The disk is issued as proof to traffic police and other road users that the motorist has complied with the law.
The minimum insurance period for which a disk can be issued is three months. This is not what I experienced at the border. I came across a case where a certificate of insurance, as a disk is popularly referred to, was issued for a period shorter than three months. I am told in certain cases, the period is less than thirty days. This is insurance market imperfection at its best.
Insurers have themselves to blame for poor claims ratio. Whereas limits of liabilities for a motor policy are fixed, premiums vary according to period of cover. Premiums can be prorated to correspond with duration of risk exposure, limits of liability cannot. One can argue that insurers are collecting premiums that are near to the ground for risk exposures that are far above the ground.
The other imperfection involves cross border insurance. Insurance policies have territorial limitations. They respond to losses that occur within certain pre-agreed geographical areas.
In motor insurance, if one gets cover under third party policy, insurance applies only when one is driving within the country. The policy becomes invalid the moment one crosses border.
Authorities in countries being visited require that you hold a third-party cover issued by an insurance company licensed in that particular country. This is a time-consuming activity.
Yellow card motor scheme, which is equivalent to the green card of the European Union, fills the gap. If you are travelling from Malawi to any Comesa member country, all you need to do is purchase the card from your insurer. The card will enable you to cross borders in Comesa member countries without hassles from traffic police vis-à-vis local cover.
The case in point is that insurance companies in Malawi are not allowed, by yellow card protocol, to sell the card to foreign drivers entering the country. The card can only be issued to existing policyholders exiting the country, not foreigners.
Views from the top are that individuals and businesses purchase insurance in good faith, relying on the integrity of insurers. The public, especially poorly informed consumers, must be protected. Insurers have a noble duty to advise the insuring public. Talk to us. We are here to guide and serve you.
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