The Implementation of Compulsory Motor Insurance in Ethiopia
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Date
2015-05
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Addis Ababa University
Abstract
The economic and social damage due to motor vehicle is escalating alarmingly. Among
others, one of the measure took by the government of Ethiopia is the recent development of
legislation “Vehicle Insurance Against Third Party Risks Proclamation”, with the aim of
laying down a mechanism to alleviate economic loss as a result of road accident. The
implementation of this legislation will affect the insurance industry. In the literature, the law
has been practiced for several decades in most countries, but imposes significant impact on
insurers’ performance. There are two views about its implementation, the first one is
compulsory insurance is a social insurance and the government control the entire activities;
premium tariff, claim settlement process, policy terms and conditions and the whole
enforcement activities in order to achieve its purpose. The other counter argues and
advocates private insurer’s involvement in compulsory insurance implementation under
minimum government control. Despite the law enforced recently in Ethiopia, this paper try to
assess the implementation of CTP motor insurance and analyze stakeholder’s level of
awareness towards CTP insurance. The study considers both primary and secondary data in
order to examine implementation of the legislation in achieving its objective and analyze the
attitude and perceptions of stakeholders; insurance officers and CTP insurance
policyholders. To address the research problem, both quantitative and qualitative research
approaches were used. The research findings indicate CTP insurance has positive result to
insurers and IFAA. However, fairness of premium tariffs and uniform claim settlement were a
challenge and awareness of parties involved in the process had wide gap. IFAA performance
to utilize the fund as planned also very low. In general CTP proclamation enforcement failed
to address the intended result and lack of awareness had considerable impact on policy
implementation. Thus, both the government and insurance association should actively
participate in the awareness creation and cooperation between parties involved in the
implementation process will address the problems
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Keywords
Motor insurance