SUNBIZ

$10 Million Loss, Say Insurance Companies

Insurance companies who offer Compulsory Third Party Insurance (CTP) are expecting a collective loss of $10million when the new Accident Compensation Act comes into effect next year. A leading insurance
29 Jul 2017 11:00
$10 Million Loss, Say Insurance Companies
Sun Insurance chief executive officer Lolesh Sharma. Photo: Waisea Nasokia

Insurance companies who offer Compulsory Third Party Insurance (CTP) are expecting a collective loss of $10million when the new Accident Compensation Act comes into effect next year.

A leading insurance company, Sun Insurance is projecting a reduction of their gross revenue by $4.5m with estimated job losses of around 20 to 30 staff.

Sun Insurance chief executive officer Lolesh Sharma said the job losses will hit their commissioned agents based in the other parts of the country. This includes Sigatoka, Ba, Nadi, Lautoka, Rakiraki, Tavua, Tavenui, Savusavu  and Labasa.

“Our agents and service centres are heavily reliant on Compulsory Third Party Insurance for their income. These are your entry level staff as CTP insurance was an ideal entry point for new staff to enter the insurance market.

“In addition, our service providers including our panelled investigators and solicitors have indicated closure of their businesses or reduction in staff numbers.”

This impact on some insurance companies comes after Government announced the allocation of $1 million for the establishment of the new Fiji Accident Compensation Commission as an independent commission to administer a no-fault compensation scheme for all motor vehicle accidents.

The no-fault scheme will provide all victims of motor vehicle accidents with the option of either receiving compensation or pursuing their claims through legal proceedings.

It will also replace the current third party insurance scheme.

For the 60,000 policyholders who are currently with Sun Insurance, they will get absorbed by the new Accident Compensation Insurance, Mr Sharma said.

Whilst CTP Insurance has been profitable in recent years, Mr Sharma said the competitive and open nature of the market saw prices drop by 45 per cent with average private CTP rate dropping from $127 to $70 over a two year period.

He said the profitable nature of the CTP Class allowed insurers to cross subsidise classes of business that were losing, like motor comprehensive which made an estimated loss of $8 million in 2017.

“It is unfortunate that the likes of the Consumer Council of Fiji are in an uninformed manner blaming the Insurance Companies for the shortfalls of the Motor Vehicle Third Party Act.”

Mr Sharma said the Compulsory Third Party framework will make one realise that the Motor Vehicles (Third Party Insurance) Act is a very old piece of legislation.

“The Act is some 74 years old. Understandably there are issues with this old piece of legislation, just like any old piece of legislation.”

He said there had been calls for reform of the law in the 1970’s, but nothing has been done.

Feedback:  rosi.doviverata@fijisun.com.fj

 

 



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