Polishing out the hurdles to efficiency

GFA Insurance Managing Director singles out the shortcomings in the industry that need to be addressed urgently.

Technically, the insurance sector operates according to a set of rules and regulations. However, Abdel Ruhomutally, Managing Director of GFA Insurance and former vice president of the Insurers Association of Mauritius, thinks there is a lack of a level playing field, which is contrary to the very principle of democratization. He points to the “lax application of the Insurance Act in spite of the new dispositions in force since 2007 for a fairer treatment of consumers”. Abdel Ruhomutally also highlights some urgent situations that need to be addressed, such as the appointment of a Chief Executive Officer at the Financial Services Commission (FSC).

Speaking about shortcomings in the industry, Abdel Ruhomutally states that the Insurers Association of Mauritius has formerly brought to the attention of the regulator that a few companies are selling insurance products for credit, which is not allowed by the Insurance Act. At the same time, healthy competition remains to be seen when it comes to the distribution of automobile spare parts. The insurance sector is witnessing stagnation he says, with approximately 475,000 vehicles on our roads. “The market is too restrained for new entrants, while big names have consolidated their place through mergers and acquisitions,” he observes.

As regards the issue of ‘constat à l’amiable’, Abdel Ruhomutally states that way back in 2003 as a young graduate from London, he took an active part in the consultations prior to the implementation of this law. A few players made strong representations against it and he had requested two main things: that the law should compel drivers and/or insureds to report an accident within a maximum of 5 days of the accident otherwise they would be fined; and secondly that a special Insurance Fraud Squad be set up by the police to tackle fake and fraudulent accidents. The first request has been enacted. However, 13 years later after the coming into force of the ‘constat à l’amiable’ the authorities have not yet set up a procedure to enforce the law and to fine late claim reporters or those who do not report their accidents at all, he deplores. “This represents a significant loss for the government,” he says.

Another critical issue that needs to be addressed: the setting up of a centralized database for credit and bad debts in the insurance sector, for which the Association has approached the authorities concerned on numerous occasions. “This database would be extremely useful for insurers in their underwriting process to charge higher premiums for reckless drivers with a poor claims track record and hence discouraging them to have accidents and therefore encouraging them to be more responsible drivers. The number of claims keeps going up year after year and the number of deaths due to road accidents is also on the rise. The total loss and auction database would help insurers to be more vigilant in underwriting such vehicles. This database could trigger a particular underwriting process that, for example, may require the customer to bring a special surveyor report confirming that the vehicle is roadworthy,” he adds

Moving to the issue of the inherent risks of the sector, Abdel Ruhomutally states that big companies are more prone to risks because they rely heavily on brokers. He questions the fact that government wants to review the Insurance Act to bring it to global standards. This should however be done by keeping in mind the democratization of the market to make it democratic, fair, level playing field, free and efficient, he concludes.