All public service vehicles (PSVs) insured by Directline Assurance will have to switch to cashless fare platforms, including M-Pesa, as the insurer moves to curb fraudulent claims coming from passenger injuries and deaths.
Directline, which has the largest share of the PSVs insurance business, has issued a circular to all operators of matatus it has insured to make the shift effective February 1, in a move that also offers a revenue boost for banks and telcos that support cashless payments.
The insurer says it has developed a passenger manifest system for verifying third-party claims. The manifest will offer evidence that people making claims related to injuries or death were indeed in the vehicles involved in the accident.
“All public service vehicles to be insured by the company will be required to register with a cashless passenger manifest system. The company will provide the technology for the consolidation of the same. This will be put in operation through digital fare payment,” said Directline in a circular issued on Wednesday.
“To this effect, from February 1, 2024, the company will only issue policies to PSVs with a registered digital payment method from any of the payment gateways, for example, M-Pesa till available in the country.”
Direcline closed last June with Sh1.66 billion gross premiums from motor commercial PSV covers, giving it a 60.79 percent market share in this class of business, according to the Insurance Regulatory Authority data.
It was followed at a distance by Xplico (9.7 percent), Africa Merchant Assurance (9.26 percent), Invesco (9.01 percent), and GA Insurance (6.94 percent). Only 10 insurers in Kenya currently underwrite commercial buses and matatus.
Directline suffered Sh576.22 million underwriting losses in insuring matatus and buses in the six months ended June 2023, exceeding the Sh311.88 million loss in the full year ended December 2022.
The insurer’s move means passengers who make cash payments in buses and matatus may struggle to get compensation in case of an accident since Directline will only recognise those passengers captured in the digital manifest.
“The company requires PSV policyholders to implement a digital passenger manifest for verification of claimants after the occurrence of accidents.
This will enhance the process of injury claims management as well as adequately respond to the timelines being applied in the small claims court,” said Direcline.
An earlier cashless fare payment platform fronted by the government, launched in November 2014, flopped following opposition from matatu operators who felt that it was a ploy to monitor their daily earnings for taxation measures. The digital payment system required passengers to get pre-paid cards or use mobile money for payment of fares in PSVs.
The motor insurance business has generally been a loss-making business for insurers over the years.
Many insurers have been aggressive in revising premiums upwards to reflect the level of risk in the market and also dropping comprehensive covers for some models of vehicles deemed too risky.
There have also been insurers adopting telematics—in-car monitoring devices— to adjust premium rates based on policyholders' mileage and driving habits.
