Amaco riding high on motor insurance

By Kenneth Kwama

To understand what keeps African Merchant Assurance Company (Amaco) in business, you have to know what does not. It does not offer life insurance and is not into unit trusts, but is thriving in a field other insurers are running away from.

Amaco, when it is on its game, is the perennial next big thing. To the untrained eye, the company’s lifeline-motor vehicle insurance, might look a bit strange, especially if you factor in recurrent complaints about fraudulent claims being lodged by unscrupulous vehicle operators.

But to Amaco, motor vehicle insurance — which accounts for about 70 per cent of its business portfolio — is the future. Unlike other local insurance firms,

Amaco’s main business driver is motor vehicle insurance, where it gets the bulk of its premiums.

Last year, the company posted a turnover of Sh960 million riding on an asset base of Sh860 million. Of the overall revenue, motor insurance contributed more than 50 per cent, while the rest came from other branches of general business like motor, fire, burglary and accident insurance.

With penetration levels pegged at a measly 2.5 per cent, shared across 44 insurance companies, the insurance sub-sector is the least developed in the financial products industry. Players are now trying more innovative ways of reaching out to the masses.

Abincha says that 80 per cent of the insurance business is conducted at the corporate level, but providers like Amaco are now looking at the low-end part of the business, whose potential is yet to be fully exploited, to grow their businesses.

"It is promising vibrant business and is definitely the way to go. We are expanding and looking at more innovative ways of reaching out to this segment," explains Abincha.

Rigorous investigation

So how has the company remained profitable despite the fact that it has been riding on the volatile motor vehicle insurance as its mainstay in business?

Although Abincha acknowledges that the motor business is tough, he says the company has managed to stay on course through implementation of rigorous investigation and assessment processes, which helps them ascertain the true nature of claims before it settles any claims.

"We have countrywide network of competent assessors. They just don’t assess losses, but investigate the true nature of the claims. Once everything is certified as clean, we move fast to settle the claims. Actually, we have done well on this score because our settlement is much faster than the 90-day period specified by the Insurance Act," he says.

Recently, the company paid out Sh12 million to a Malindi-based hotel —Palm Tree Club— whose premises was razed down by fire, despite the fact that investigations to the incident were still incomplete.

Amaco says this is a demonstration of its commitment to good business practise. The firm promises to do more to convince people about the usefulness of insurance to improve penetration. Building on its already prominent position across the country, Amaco is also laying the basis for more investments that will enhance both the group’s service capacity and profitability. It commenced business in May 2000, but by the end of 2001, its turnover had hit Sh110 million. Now it says it is on course and working hard to increase its asset base by the end of this year.

For an insurance company, high value tangible assets is a reflection of the company’s financial health and is useful when carrying out evaluation of a firm’s viability in business and also guarantees increased earnings from investment.

As an insurer with countrywide sales network, Amaco has set itself the goal of providing greater value to its clients. Several strategic investment initiatives illustrate the future direction of the company, which Abincha says is working hard to grow the non-motor part of the business.

To enhance this course, the company is working out an elaborate network that will see it increase its branch network and growth in the local market. Recently, it opened new offices in Naivasha, Narok, Busia, Kakamega and Bomet.

"We hope this will take us closer to the people and enable our clients to access service faster. The new branches will be an important building block of our growth strategy and in line with our strategy for further growth," says Abincha.

Conditions in the motor vehicle insurance industry have not been encouraging in the past few years, but are expected to improve amid fresh impetus geared to strict enforcement of the law. This is expected to significantly improve adherence to road rules and by extension, help reduce the number of accidents and malpractices.

"This will improve the general business environment and infuse discipline, which will be good for all the players," he says.

—kwama@standardmedia.co.ke