Choice of Insurer
In this article we will be concentrating on the most common type of insurance; motor insurance and trying to understand it better.
vehicles are legally required to have insurance COVER IN TANZANIA.
When buying a car, do you look for the cheapest car to buy? Not caring about the quality or safety of the vehicle? If your answer is NO, then why look for the cheapest possible insurance policy. When you want to buy a car, you look at the benefits that the car offers. You don’t just say “I’m going to spend Tshs 1,000,000/- on a new car” then buy the first one you see for sale only to find out that there is no AC, power steering etc. You know you will not get such features for that kind of value. Then why do you want to buy insurance on the same assumptions?
When you ask for motor insurance quotes and several insurers quotes are presented with variable premium amounts, you need to look at the quotes and ask yourself: am I getting like-for-like policy covers? If you look at the policies more closely and compare them you may find that some have higher excess/deductible amounts (an amount subtracted by an insurer from what they have paid for your claim, which is payable by you), certain covers may be excluded that other policies include and so on. This is why the premiums vary; don’t simply go for the cheapest.
Like I said in my last article, you will benefit from visiting an insurance intermediary such as a broker who does not endorse a particular insurer and therefore subjective to your needs. It is an insurance Brokers duty to ensure your cover is correct for your particular needs, is cost-effective, and ensure that when you have a claim it is processed promptly with the best possible settlement.
JACOB’S TIP:
When deciding on an insurance company. Try calling garages you would use in the event of your vehicle needing repairs, to ask them which insurers they do NOT want to deal with, and WHY? This will give you an insight to which insurers are better when it comes to claim settlements and reduce stress should you ever need to make a claim.
Correct Sum Insured
In Tanzania the value used for insuring your vehicle is what we term “Market” value (the price of your vehicle if you were to sell it today irrespective of how much you originally paid for it). This market value when compared to the retail value can be as much as 10% less. When telling a broker/agent/insurer the value of your vehicle you should give them the current market value.
Good brokers/agents/insurers will let you know if you have over or under insured your vehicle (such mistakes can cost heavily when claims arise). Was your vehicle tax exempt? If YES, you still need to include the tax in the market value of your vehicle. The main reason for this is because when you claim and new parts are needed for your vehicle these will be bought tax inclusive.
You also need to check that your brokers/agents/insurers are reducing the market value of your vehicle at renewal each year. Some brokers/insurers/agents never decrease the value of your vehicle each year (even though the market value is decreasing every year). They insure your vehicle at the same cost, ignoring the fact that the value at which your vehicle is insured has dropped. In effect they get an increase in rates without showing this. If you end up making a claim for total loss, you may be subject to an Average Clause (I will explain this in my next article).
A good broker/agent/insurer will re-value your vehicles market value yearly, which SAVES YOU MONEY! Most rarely do this, so ask them why they don’t. Thus you may feel your broker/agent/insurer is doing a good job holding your premium costs at last year’s level. This ignores the fact that your vehicle is probably worth 10% less now than 12 months ago due to depreciation. THIS MEANS YOU’RE LOSING OUT.
JACOB’S TIPS:
The goal of insurance is to put you in the same position after a loss as you were before. If you had 2002 VW Golf which was a total loss after an accident, you can not expect to get a 2009 model to replace it. This would defeat the purpose of a motor policy, because you would be better off. So if you have “Pimped” your vehicle you must let your broker/agent/insurer know what you have customised.
For every year you don’t make a claim, you should be rewarded with a discount on next year’s premium. This is known as a No Claims Discount or No Claims Bonus. Some insurers accept letters from foreign insurers (if you have been living abroad); stating what discount you had and will apply it to your premium. Make sure you are benefiting from this. Insurers have a maximum discount they will give; once you reach it you won’t be able to get further discounts.
At your policy renewal, ask your broker/agent/insurer if they have re-valued your vehicle. If they have not done this then ask them to explain why.
Type of Motor Policies
Third Party Only
Third Party Fire and Theft
Comprehensive
Third Party Only policy covers damage to the other person’s property caused by you where you are at fault. With this type of policy the insurers will pay for the damage. There is no cover at all for damages to your vehicle. Most insurers only offer up to a limit of Tshs 30,000,000/- for the third party liability, while others offer up to Tshs 40,000,000/-. People nowadays are buying vehicles in excess of Tshs 40,000,000/-.
SCENARIO:
You have caused an accident and totally written off a third parties vehicle (a Mercedes Benz Coupè). Your insurers liability limit is Tshs 40,000,000/- but the third parties vehicle has a market value of Tshs 65,000,000/-. Your insurance company will pay up to their limit as per the policy and you will be liable for the remaining Tshs 25,000,000/-.
Third Party Fire and Theft policy covers fire damage and if your vehicle is stolen. If you have an accident which is your fault, then cover is as per above. Damage to your vehicle is not covered.
Comprehensive policy offers the widest covers. It includes the previous policies with the addition of cover for your own vehicle. You are also covered for non-fault claims and can therefore claim off your own policy or the third party who caused the claim.
With all of these policies there are exceptions on what is covered termed as “Exclusions”. I would strongly advice you to ask the Broker/insurer/agent what is not covered, rather than what is covered. Thus if you know what your policy does not cover then you will know what it does cover. Some Brokers/agents/insurers are very good at advising you the positive attributes of a policy but not the negatives. Brokers who I have recommended my friends to seek help from, like MIC Global Risks (Insurance Brokers) Ltd, Ndege Insurance Brokers and Busara Insurance Brokers Limited have been professional in their advice; which my friends appreciated very much.
JACOB’S TIPS:
If your financial situation changes, you can upgrade or downgrade your motor policy when you need to. Visit your broker/agent/insurer to discuss this. Ask for the third party liability amount to be increased and see how this affects your premium. If it is affordable then I would suggest you take the policy with the increased amount.
Third Party Only cover is ok for people who cannot afford a better type of motor insurance or who have vehicles that are not worth much. It may makes sense if you are driving an old vehicle where almost any repair would cost more than its worth, or where its replacement might only cost a few million Tshs at most. But if your vehicle costs more to replace, you need to consider something better.
Third Party Fire and Theft (TPFT) cover is useful for those whose vehicle is not worth much, but would still cost more to replace than the cost of the repairs. It can also be useful for younger drivers who might find fully comprehensive policies very costly, those who only drive occasionally or have low no claims bonuses. TPFT in my opinion is generally unsuitable for regular drivers, or those with expensive vehicles.
Not all Comprehensive policies are the same. Although all insurers will cover the basics, many will offer additional variants on their policies, such as courtesy cars in the event of theft, breakdown or accident; currently only one insurer in Tanzania (Real Insurance Tanzania Limited) offers a courtesy car on their policy called “Amani”.
If you have more than one vehicle and all insured with the same insurer you can ask for a fleet discount (a discount on the combined total of the premiums). THIS CAN SAVE YOU MONEY!
Bulk buying always gives you the avenue to negotiate a discount. Instead of just insuring your motor vehicle, ask for a quote for your house (if you own it) and/or the contents. If you take all the insurance policies together from one insurer you may be able to get a discount on the rates.
Particulars of Motor Insurance Cover
These are the sections on all standard motor insurance policies. Depending on the type of motor policy you have, some sections may not apply to you. I have just listed and explained each one in its simplest form as follows:
Third Party Injury/Death = This covers injuries or death to a person as a result of an accident caused by you. Cover amount is usually unlimited.
Third Party Property Damage = This covers damages to another persons vehicle, house or any other property which you have damaged as a result of an accident caused by you. Cover amount varies from insurer to insurer and usually falls between Tshs 30,000,000 and Tshs 40,000,000.
Passenger Legal Liability Per Person/Per Event = This covers the legal costs for passengers you were carrying in your vehicle at the time of an accident should they want to sue you. This does not include family relatives. Insurers give a limit per person and also per event. Thus if 4 passengers wanted to sue you and the insurer was covering up to Tshs 30,000,000 the total would be Tshs 120,000,000. The insurers may have a limit per event of Tshs 100,000,000 meaning you will be liable for the other Tshs 20,000,000.
Medical Expenses = This is for your medical bills; it is usually a nominal amount because most people have private medical insurance. Some insurers do not cover this for commercial motor policies and motor cycle policies.
Towing Charges = This covers the expense you might incur for getting your vehicle towed home, to a police station, to a garage etc. The cover amount is again nominal and you will need to present proof of payment to obtain a reimbursement.
Windscreen = This covers the cost of replacing your windscreen due to damages. Sometimes, there may be a shortfall in the amount the insurer is going to pay.
Riot and Strike = This covers your vehicle if it is damaged as a result of rioting in the area the vehicle was. You won’t be covered if your vehicle was being used in the riot for carrying people etc. This is a very subjective section of the motor policy and not all insurers look to cover this.
Geographical Limit = All Tanzania motor policies automatically cover your vehicle within East Africa, the type of cover you will have when you enter other East African countries is Third Party, even if in Tanzania you have a Comprehensive policy. You must take an additional cover called the COMESA or Yellow Card cover (when travelling to other COMESA member countries) and be charged extra for this depending on how long you would be in the country. Passengers with no private medical insurance will be charged a premium.
Excess Otherwise Known as Deductibles on Motor Policies
The sections listed below all carry excess/deductible amounts. Such excesses/deductibles are there to make people drive with care or to stop claims for small amounts which you can pay for yourself. To some this may seem unfair, but I think it is quite reasonable because given the chance some people would even make claims worth Tshs 500/-.
Damage = Once the authorised repairs have been done on your vehicle, the insurers will pay the repair cost minus the excess/deductible on the policy; which varies from insurer to insurer.
Driver under 25 years of age = As mentioned above, the same applies once repair are finished. Statistics show that younger drivers get into more accidents, and therefore the excess/deductible is there to remind younger drivers to be more careful.
Driver with Licence less than 2 years = Drivers who have not been driving for more than 2 years are likely to cause accidents due to inexperience. Thus an excess/deductible is also applied which varies amongst insurers.
Windscreen = In a year you can have several windscreens replaced due to damage. This is a common claim therefore insurers apply a small excess/deductible. Some insurers even limit the number of times you can claim for this.
Theft = There is an excess/deductible applied here too. However, if your vehicle is found then the excess amount will be refunded back. The amount for this excess also varies from insurer to insurer.
Third Party Property Damage = This is the same as the damage excess/deductible but applies to Third Party Only and Third Party Fire and Theft policies.
THE EXCESS/DEDUCTIBLE AMOUNTS FOR THE ABOVE ARE SOMETIMES A FIXED OR A PERCENTAGE OF THE AMOUNT BEING CLAIMED. PLEASE REFER TO YOUR POLICY WORDINGS.
Some Insurance Brokers have a Risk Management Department (RMD); this can be very helpful when you need to source relevant information about protecting yourself. Risk Managers are able to study and design bespoke policies with your specific needs in mind, one of these RMD I have had a personal experience with is within Ndege Insurance Brokers. Brokers manage risks but a risk manager takes it to the next level.
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