Most People Take Out Fire Insurance 'Because It's a Loan Requirement'

Insurers have argued that the low uptake of insurance against fire in the country is down to such factors as the relatively low risk of fire incident compared to other accidents, the small profit margin for insurers, and the country's economy that is still small.

They made their arguments on Tuesday, January 25, 2022 as the Senatorial Committee on Foreign Affairs, Cooperation and Security started engaging with different entities in line with the oversight of the government's actions concerning fire prevention and fighting.

On Tuesday, the senators met with the Rwanda Insurers Association (ASSAR), and the Private Sector Federation (PSF).

The oversight follows the increasing fire outbreaks across the country despite the exiatence of the Prime Minister Instructions, of 2014, relating to the fire prevention in Rwanda.

One of the provisions of the instructions states that for the purpose of insuring materials, properties, persons, and their adequate compensation, all public buildings and other public places shall have insurance against fire outbreaks.

The committee reviewed the inspection report of the Ministry of Emergency Management (MINEMA) which highlights that many public and private buildings do not have the equipment to prevent and combat fires.

The report states soaring number of fire outbreaks for the last 3 years; from 21 cases in 2018 to 71 cases in 2019 with 89 cases recorded in 2020.

In addition, the Committee will tour 19 districts countrywide to assess the enforcement of the Prime Minister's instructions of 2014 relating to fire prevention in the country.

During the tour, the legislators will assess public buildings, markets and malls, commercial and artisan hubs (udukiriro), industries, among others.

Annie Nibishaka, Chairperson of Rwanda Insurers Association (ASSAR) said that that the fire insurance product was still undeveloped, estimating that annual premiums the insurers collect could amount to Rwf20 billion.

Nibishaka revealed that just about 30,000 local entities including individuals and institutions had fire insurance, saying that they were very few compared to the country's population currently estimated at 13 million.

She said that most individuals get take fire insurance policies on their houses just because it is a requirement by the bank before they can be given a loan.

"But after servicing the loan, they in most cases think that it is no longer necessary to continue paying for the fire insurance," she said, adding that this is most common for residential houses.

"I think this is a problem. Fire incidents are not prevalent in Rwanda, but when they occur, they cause huge damage, leaving people in a weak position," she said.

Though there has been the Government's directive requiring all public buildings to have fire insurance cover, it was not [effectively] enforced, calling for ways to ensure that people embrace it adequately.

Alex Bahizi, CEO of BK General Insurance Company said that the risk of fire is not alarming among Rwandans, but said that it was increasing in different sectors especially in factories making mattresses, unplanned settlements, areas with poor electricity infrastructures (including unstable power), commercial and artisan hubs (udukiriro), resulting in the need for protection against this incident.

In addition, he said, the cost of fire insurance distribution and marketing is high compared to the premiums paid by the policyholders, making this product relatively less profitable.

"The fire insurance premium, which is one-thousandth of the value of the insured asset, is the lowest of all the insurance product rates," he said.

Given that the purchasing power of Rwandans is still low as a result of the limited economy, insurance was not considered a priority by many.

"On the priority scale, insurance comes at the last position. When people have met all their priority needs including education, healthcare, food, accommodation and clothing, and they have some money left, that's what they invest in insurance," he said.

Compensations marred with inefficiencies

Hadji Abdul Karemera, the Chairperson Rwanda Wood Value Chain said that some fire incidents in commercial and artisan centres (udukiriro) have been blamed on factors including the flammable materials such as mattress (foam) and sawdust being in the same vicinity where welding activities are done.

"Buying insurance coverage for wood value chain businesses is very important to protect them from losses in case of fire," he said, calling for sensitization for people engaged in this trade.

Some people expressed concern that investigation to establish the cause of the fire and the extent of damage delays and that sometimes this affects the quality of the report and the people who want compensation.

Callixte Kanamugire, Chief Advocacy Officer at Private Sector Federation (PSF) said that there is a need to put in place guidelines that will set the period when an investigation into the reason of the fire should be done and how long it should last, as well as the period within which the due compensations have to be paid.

On the complaint that sometimes the compensation claims of the affected people are not paid or payment delays, Nibishaka said that for an insurer to pay, the incident has to be thoroughly investigated by Rwanda Investigation Bureau, which may take some time.