Auto insurance premiums for maxis could double: CB Governor

The Governor of the Central Bank said Wednesday some insurance companies are offering under-priced third-party policies to maxi and taxi owners and he warned of possible increases in premiums for all car owners.

Ewart Williams said the problem is that some insurance companies have failed to maintain what he described as "prudent reserves".

He suggested that maxi-taxi premiums could double. If that happens the operators will like pass the cost on to customer, causing a sharp rise in fares.

Williams also said estimates suggest that about 39,000 uninsured vehicles are on the roads.

The Governor stated that currently five out of 18 companies currently writing motor insurance, provide 90 per cent of the third-party coverage to maxis and taxis.

“Furthermore, at December 31, 2009, 60 per cent of maxis with third-party insurance were insured with two companies,” he said.

He expressed concern that insurance companies specialising in third-party motor insurance have underpriced the premiums to secure market share and are “hoping they don’t have to meet those claims.”

He noted that when low premiums are paid the insurance companies end up with inadequate reserves to cover claims for which they are liable. “Any under-reserving threatens policyholder protection and encourages poor service and unfair claims practices,” Williams said.

Williams said poor market conduct results in non-payment of claims, late payment of claims and under payment of legitimate claims.