Insurers now warn that RUTO’s insatiable appetite for money may lead many to their early graves as they warn motor vehicle tax is a death trap – Look!

Sunday, May 19, 2024 - Car insurers have criticized President William Ruto’s government over the motor vehicle tax which they claimed is very dangerous.

In a press statement, the insurers raised the alarm over a potential mass migration of Kenyan motorists to third-party insurance if the National Assembly approves the proposed motor vehicle tax in the Finance Bill, 2024.

The Association of Kenya Insurers (AKI) urged lawmakers to reject the proposed tax, pointing to its detrimental impact on the insurance industry and motorists alike.

Third-party insurance, which only covers damages to other parties in the event of an accident, would become the go-to option for many, AKI predicts. This type of insurance provides protection against physical injuries, vehicle damage, property damage, and death caused by the insured vehicle. However, it does not offer any compensation if the accident is caused by drunken driving.

The Finance Bill, 2024, introduces a motor vehicle tax set at 2.5 per cent of the vehicle’s value, with a cap of Ksh100,000.

Tom Gichuhi, the Executive Director of AKI, explained that this new tax would significantly increase motor insurance costs.

The current comprehensive insurance premium rate averages at 5 per cent, and with the additional 2.5 per cent, the total premium rate would rise to 7.5 per cent.

“With motor vehicle insurance being compulsory in Kenya, we anticipate a major shift towards third-party motor insurance if this tax is implemented. 

"Consequently, motorists will face higher risks, as they will essentially only be covered for third-party liabilities, leaving their own vehicles unprotected in the event of accidents. This could burden motorists with significant out-of-pocket expenses for repairs or replacements,” Gichuhi stated.

Insurers also warned that a shift to third-party coverage would reduce their income, which would in turn lower corporate tax contributions.


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