Underwriting challenges facing public service vehicles insurance in Kenya
The purpose of this study was to determine the underwriting challenges facing PSV insurance in Kenya. This was in view of the literature review indicating that many PSV insurers had collapsed while others faced imminent collapse. Many general insurers were also reported to be avoiding PSV insurance particularly for 'matatus'. Whereas a lot of studies had been carried out on PSV sector, no specific study examined the underwriting challenges facing PSV insurance in Kenya. The objectives of the study were; to establish the approaches used in underwriting PSV insurance in Kenya and to identify the underwriting challenges facing PSV insurance in Kenya. The literature review covered the basic principles of insurance as they relate to motor insurance, the concept of underwriting as it relates to PSV insurance, regulation of PSV in Kenya and the role of information technology in insurance as presented by various researches, scholars, analysts and authors. The study adopted a cross sectional research design with a population of thirty six (36) general insurance companies underwriting motor insurance. Primary data was collected by use of a questionnaire having structured and open ended questions. Descriptive statistics consisting of frequencies, percentages, arithmetic mean and standard deviation were used. Data was presented by use of tables, bar charts and pie charts. The study concluded that most insurance companies wrote both individual and fleet PSV risks and very few were using accommodation of non-motor business in underwriting PSV risks. Many of the insurance companies that avoided PSV risks attributed this to company policy. The key factors in underwriting PSV risks were vehicle carrying capacity, use of the vehicle and the type of cover. The main contributor to PSV underwriting problems was cited as moral hazard. The key problems in underwriting PSV risks were weak enforcement of traffic laws, lack of industry integrated motor insurance data system, fraudulent claims, weaknesses in regulatory framework and generous judicial awards. Charging of uneconomic premium rates was attributed to stiff competition and undercutting within the industry. The main contributors to fraudulent claims were; fraud aided by lawyers, claimants and medical personnel. Most underwriters reported that their IT systems could not capture all details necessary for underwriting even though many had reported that their underwriting process was fully automated. Many insurance companies recommended the introduction of structured compensation system, maximum limits for third party liability, regulatory review and establishment of an integrated motor insurance data system as some of the possible remedies to problems in PSV insurance in Kenya.