Insurance uptake in Kenya remains low compared to other key economies with the insurance penetration standing at 2.4 per cent according to 2020 Financial Stability Report by Central Bank of Kenya (CBK).
However, for car owners, insurance uptake is not an option and as it emerges, low end vehicle owners pay a heftier price in insurance premium compared to those with high end and costly motor vehicles.
Motor vehicle insurance premiums average between 3 to 5 per cent of the total value of the car for a comprehensive cover.
An insurance broker from one the local firms told Kenyans.co.ke that a car valued at more than Ksh1 million will be charged a premium of 3.8 per cent which is an equivalent of Ksh38,000, while a car valued at Ksh500,000 will pay a premium of up to 4.5 per cent of the cars total value or an equivalent Ksh22,500.
The premiums further reduce as the cost of the motor vehicle increases, with vehicles costing upwards of Ksh5 million only paying premiums of between 3.0 to 3.5 per cent of their total value.
For instance, a car which cost Ksh5,000,000 will be charged a 3 per cent premium, which is an equivalent of Ksh150,000.
If the same car was to be charged the premium that a Ksh1 million car is charged at 3.8 per cent, the amount would increase by Ksh40,000 to Ksh190,000 and further to Ksh225,000 if the car would be insured at a 4.5 per cent premium as charged to those with vehicles costing less than a million.
The source, who sought anonymity, further notes that a Range Rover valued at around Ksh11 million, can attract premiums as low as 3 per cent if not lower.
He further intimates that the reason behind the low premiums charged on high end vehicles is due to the risk associated with them, which he says is lower than the risk associated to the cheaper alternatives.
“Our firm, for instance, does not insure cars that are valued below Ksh500,000, the risk is too high. So what we do is give those clients an alternative underwriter to cover the risk,” he added.
“There are those who target such clients with cars valued at Ksh500,000 and below, so the risk is minimized because that class is growing every day."
Demand for vehicles in the country has sored due to the rise of the middle class with units flocking the Kenyan market ranging between 800 - 1500cc.