Moses Mbwika- 11-909
Dr. Peter Ngure
Paper submitted in partial fulfillment of the course BUS 611: Business Research Methods
29th April 2012
CHAPTER ONE: INTRODUCTION
1.1. Background of the study
Although the exact date of birth of the insurance industry in East Africa is not known, there is evidence that the first marine agency was established at the Island of Zanzibar in 1879. It took another twelve years before another marine agency was established in Kenya in 1891. Motor vehicle owners in Kenya were legally compelled to take out insurance against traffic accidents involving third parties in the mid 1940s under the Road Traffic Act (RTA). The history of public service vehicles (PSV) dates back to the late 1950s when there appeared a new form of taxi operating between the city centre of Nairobi and Makadara in Eastland of the city. The fare, irrespective of distance was thirty cents, the Kiswahili equivalent being “mapeni matatu,’ which was adopted as reference to this taxi and shortened to “Matatu” (Timbwa, 1985). The origin of Matatu industry can be traced from the type of transport system that operated in towns in the early 1960s. Initially, the Kenya Bus Service existed since 1934 as the sole legal provider of public transport services. It was jointly owned by the United Transport Overseas Ltd (75%) and the Nairobi City Council (25% of the shares). Public transport in Kenya, especially in urban areas is dominated by Matatu vehicles. In the early 1960s, the total number of Matatus operating in the country was less than 400 and operated in form of taxis. In 1973, President Jomo Kenyatta, responding to lobbying from Matatu operators declared that they were a legal mode of transport and could carry fare paying passengers without obtaining special licenses to do so but had to comply with existing insurance and traffic regulations (Aduwo, 1992).
By 1990, of the 333,300 vehicles registered in the country, 17,600 were Matatus (Bhushan, 1993 cited in Muyia, 1995). By 2003, the number of Matatus operating in both urban and rural areas was estimated at 40,000 (Asingo, 2004). They comprised of Nissans, mini-buses and pickups. They provided employment to nearly 160,000 persons and generated vast revenue for the Government in form of charges for licenses, duty, VAT and other taxes.
In addition, the industry plays a leading role in transportation of persons and goods in both rural and urban areas. Unfortunately, the industry’s vast growth has been accompanied by increasing road traffic accidents that have threatened safety of Kenyan travelers. The accidents increased by 182% from 3,578 in 1963 to 10,106 in 1989 and 11,785 in 1994 (Muyia, 1995). In these accidents, 2,014 persons were killed, 6,650 were seriously injured and 11,094 had minor injuries. The causes of the accidents included reckless driving, non-roadworthy vehicles, overloading and poor conditions of the roads.
Underwriting is the selection and rating of risks by the insurer (Canner, 2007). There are various considerations that guide the underwriting process leading to the decision as whether to accept a given risk or not and if accepted at what premium rate. The key considerations in motor underwriting include; Use of the vehicle, District of garage, Make and type of the vehicle, seating and carrying capacity, the type of cover required, the driver’s details and the value and age of the vehicle.
Use, refers to whether the vehicle is public hire or Private hire. District of garage refers to the address where the vehicle is normally garaged. Make and type of the vehicle specifies whether the vehicle is an Isuzu van, Toyota saloon, Mazda bus etc. Seating and carrying capacity refers to the number of passengers including the driver and...