Public transport operators are to benefit from cheaper insurance financing costs after the industry’s second biggest insurer, Invesco, clinched a deal that will see premium financing charged at a rate below the central bank’s published base lending rate.
According to a press statement circulated to media houses by Spire Bank, Invesco customers will be charged an interest rate of eight percent on premium financing loans.
The deal is set to increase competition in PSV insurance, which is dominated by four players who control 96 percent of the premium income from the industry.
Invesco, which is largely owned by public transporters lobby, Matatu Owners Association (MOA), has a 37 percent market with Sh2 billion in premium income, according to Insurance Regualtory Authority (IRA) 2016 statistics.
The market leader is Directline Insurance, which holds 50.8 percent of the market share and Sh2.7 billion in premium income.
Other big players are Africa Merchants Assurance Company (AMACO) with seven percent market while Gateway Insurance has two percent.
And it is not just in insurance that the deal will spur cut throat competition. The new deal could also change the face of insurance premium financing in the country.
Most banks have adjusted all their credit products to 14.5 percent, including insurance premium financing to the maximum allowed by the interest rates capping law that became effective a few days ago.
Insurance is one of the biggest costs in public transport as premiums are calculated based on the number of customers and the number of trips that a vehicle makes in a day.
In essence by entering the new deal, Spire Bank has undercut most of the banks a move that could see them reviewing their insurance premium financing rates to stay competitive.
Said the statement from Spire Bank: “The Bank has partnered with Fidelity Insurance and Invesco Assurance to provide the flexible and cheaper insurance premium financing solution to its customers.”
Spire Bank,Managing Director Tim Gitonga said the product has no hidden charges and customers will be able to access insurance cover immediately while paying their premiums in easy and less burdensome installments.
“The scheme offers our customers the lowest insurance premium financing rates in the market. It has simplified application documentation and is open to premiums as low as 25,000 shillings with no maximum limit,” said Gitonga.
Gitonga said the scheme was part of the bank’s strategy to grow its banking business through the provision of a differentiated suite of retail, SME and corporate banking products and services to meet the ever changing needs of its customers.
“The bank anticipates its growth will be driven through adopting innovative products and services and by removing barriers to entry,” said Gitonga.
Spire bank is owned by Mwalimu National Sacco and Sameer Investment Group. Mwalimu National is today the largest Sacco in Africa with over 70,000 members, including employees of the Teachers Service Commission in post-primary institutions, TSC secretariat and Mwalimu Sacco staff.