17 Dec 2020

A public tender was advertised in January 2015 for local registered companies with relevant PPADB registration certificates to tender for the administration of Guaranteed Loans Insurance Fund (GLIF), the Minister of Finance and Economic Development, Dr Thapelo Matsheka has said.

Dr Matsheka said AON Botswana as one of the two companies that tendered to provide the service was ultimately engaged for a period of five years, commencing on July 1, 2015 following tender evaluation by PPADB Act.

The minister said the government and Aon Botswana entered into a contract for the management and administration of the Guaranteed Loans Insurance Fund (GLIF) – Tender No. FDP/TC/1/26/14 – 15.

“The initial contract was for a five-year period from July 1, 2015 to June 30, 2020.

However, the contract has been extended for a period of 12 months, ending June 31, 2021 to allow for tender processing for the new contract which was delayed by frequent suspension of the tender publication due to COVID-19 related emergencies,”  he said.

Dr Matsheka noted that he was aware of the feedback that the current fees charged to beneficiaries on residential properties under the GLIF were above the market rates.

He said his ministry was in consultation with fund administrator and they had reviewed the housing premium rates to align with the market rates to be implemented by January 01, 2021.

“With these reviews, the premiums charged under GLIF will be aligned to the market rates,” he said.

In addition, Dr Matsheka also indicated that for both motor vehicle and housing insurance cover, there was a credit life cover, which had also been reviewed for each market asset (housing and motor) in alignment to the market rates.

“I must emphasise that Aon Botswana (Pty) Limited does not set the premium rates, but rather engaged to provide administrative services on behalf of GLIF,” he said.

Dr Matsheka said the premium rates in place for the Government Loans Insurance Fund were determined by the government in consultation with Aon Botswana based on the insurance market conditions, with guidance from the actuaries.

Dr Matsheka thus said the review and any changes to the premium rates that may occur at any given time were usually informed by trends in the local insurance market space.

Furthermore, Dr Matsheka said premiums on motor vehicles were not charged by Aon Botswana, but rather charged by the fund.

He said the charges were not fixed as they applied on the value of the motor vehicle, which was subject to evaluation on an annual basis, as per the fund policy.   However, Dr Matsheka said he was aware that some of the customers paid fixed amounts for the entire period of the motor loan.

“This is as a result of not valuing the vehicles and submitting the valuation report to the GEMVAS office to adjust the premiums on an annual basis,” he said.

Dr Matsheka said his ministry, together with the administrator, had embarked on a nationwide campaign to advocate for valuation of all GEMVAS acquired motor vehicles and houses in order to benefit from the adjustment of premiums under the insurance Scheme. 

Dr Matsheka was responding to a question from Palapye the Member of Parliament Mr Onneetse Ramogapi, who had requested that Parliament be appraised on the contract surrounding AON Insurance Company and the government and whether the work was advertised and tendered for.

The Palapye legislator also asked the minister, if he was aware that AON rates were not competitive as it charged almost 40 per cent higher than competitors.

He also wanted to establish if Non-Banking Financial Institutions Regulatory Authority (NBFIRA) was aware that AON charged fixed amount premium insurance on vehicles for a five-year period without considering depreciation on a yearly basis as it was the case with the other schemes. ENDS