The shift from Flat Rate Underwriting to Non-claim Discount Underwriting will however reward accident-free drivers with concessions, making them pay only half of the premiums under the new provisions that takes effect on March 1.
The Chief Executive Officer of the Association of Kenyan Insurers Tom Gichuhi told Capital Business on Wednesday that the change follows huge losses incurred for underwriting private motor vehicles due to the high number of claims over the last 10 years.
“There are some people who are going to feel the heat, but if you have been a good driver – a careful driver – then your premium will be adjusted downwards,” Mr Gichuhi said.
“Any insurance claim lodged will qualify one as an accident-prone driver,” he explained.
New car owners will also not be spared, as they will be expected to prove themselves over a period of time before their premiums can come down.
“We will start with the 7.5 percent, which is taken to be the average. It is therefore up to that driver to prove he is better to generate this new rate,” he said.
Should a driver go for one year without lodging a claim, their premium will come down by 20 percent in the following year, followed by three subsequent 10 percent deductions, making a 50 percent cut over a five-year period. A claim at any point will automatically disqualify the driver from a non-claims discount once the insurance is up for renewal.
Drivers changing countries of residence can also transfer their discount so long as the country has similar regulations.
“It is a globally accepted practice, so even if you were going to Germany you can enjoy the same benefits there as you do here. We have had insurance companies offer the discount to foreigners before.”
The shift will require vehicle owners seeking insurance to disclose their driving history outlining how many accidents they have had. Drivers who transfer from an insurance company to another will also be required to produce a letter from the immediate former insurer, detailing their accident history.
Insurance companies will assess the accident risk exposure of individual motorists before agreeing to cover their vehicles.
Mr Gichuhi has advised drivers to minimise claims for minor incidents in an effort of keeping their accident records clean.