Kampala- Insurers have been warned against charging lower than the approved minimum premium for insurance policies (undercutting) as the act works against the industry.
Speaking at the insurance players’ chief executive officers meeting yesterday, Mr Protazio Sande, the assistant director market research and development Insurance Regulatory Authority (IRA) said despite the regulator’s warning, some players have continued to undercut, something that results into unfair competition.
According to insurance law, the minimum premium rate for motor comprehensive policy cover for private vehicles is 4 per cent of the car value while that for buses and other passenger service vehicles is 7.5 per cent of the value.
For burglary and house breaking, the premium rate is 0.1 per cent of the total value, plus 0.5 per cent without first loss while that with first loss has to add 1 per cent on top of 0.1 per cent.
In case of fire in schools, the minimum premium rate is 0.15 per cent while that of offices is 0.125 per cent.
Price undercutting results into revenue loss for the industry and some players who undercut are also unable to pay claims promptly.
Although the regulator had suggested tough measures against any player who undercuts insurance premiums, including payment of a Shs10 million fine for each policy where undercutting has been found, sources say it is yet to be implemented.
IRA boss Ibrahim Kaddunabbi Lubega noted that price undercutting is the most faulted rule but said some players have been fined.