New Vehicle Insurance Policy in Ethiopia Sparks Debate
The recently implemented vehicle insurance policy in Ethiopia, which focuses on third-party risk, is generating controversy among industry stakeholders regarding its clarity and the ramifications of adjusted premium and indemnity rates.
While some experts support the decision as a necessary improvement, others criticize the lack of transparency surrounding the new regulations. As vehicle accidents in Ethiopia become increasingly common, resulting in major loss of life and property damage, the need for effective insurance coverage has increased.
Many victims of road accidents suffer not only physical harm but also financial burdens, especially when the vehicle at fault is uninsured. In response to this pressing issue, the Ethiopian government has mandated third-party insurance coverage for vehicle accidents.
However, sources within the insurance sector have reported that the recent revision of insurance tariff rates was unexpected and poorly communicated. A source from the industry expressed concern about existing loopholes in the law. Previously, the payment ceiling for death claims was set at 5,000 birr, but this has now increased to a minimum of 30,000 birr and a maximum of 250,000 birr. The informant noted that it remains unclear to whom these payments will be disbursed.
Additionally, the new policy raises fears that customers may choose not to buy insurance. Previously, the price to insure a private car was around 500 birr, but it has now risen to over 2,000 birr, potentially discouraging drivers from obtaining necessary coverage.
The new vehicle insurance policy, outlined in Regulation 554/2024—replacing Proclamation No. 799/2003—sets forth the premium rates and compensation amounts for third-party vehicle accident insurance. Under the revised guidelines, monetary compensation for bodily injury has increased from 40,000 birr to a range of 30,000 to 250,000 birr, while compensation for property damage has risen from a maximum of 100,000 birr to 200,000 birr.
Yared Mola, president of the Ethiopian Insurers Association and CEO of Nyala Insurance S.C., defended the new policy. He stated that it was carefully studied by international experts before implementation. Mola emphasized that the changes address previous concerns regarding low payment limits for third-party insurance, marking a major improvement for those injured in vehicle accidents.
Experts agree that the reform is beneficial, as it encourages more individuals to obtain insurance, allowing companies to profit from the premiums collected. The insurance compensation system is designed to help individuals recover from economic losses resulting from liability, property damage, or bodily injury.
