REPRIEVE

Court slams breaks on motor insurance premium hikes

Court bars insurers from raising motor vehicle premiums

In Summary

“Upon careful evaluation of the same I am satisfied that the petitioner has demonstrated a prima facie case with likelihood of success and declining to grant the same would prejudice the petitioners,” the court ordered.

The insurance firms had increased their premiums by 50% beginning January 2022 for both Third Party and Comprehensive covers.

 

IRA chief executive Godfrey Kiptum with Equity Group CEO James Mwangi during the issuance of a licence allowing the Group to run an insurance business /HANDOUT
IRA chief executive Godfrey Kiptum with Equity Group CEO James Mwangi during the issuance of a licence allowing the Group to run an insurance business /HANDOUT

Motorists on Wednesday received a temporary reprieve after after the high court  stopped insurers from raising premiums.

Justice James Makau further barred the companies from excluding vehicles which are more than 12 years old or valued at Sh600,000 or below from their comprehensive cover.

The insurance firms had raised premiums by 50% from  January 2022 for both Third Party and Comprehensive covers.

“Upon careful evaluation of the same I am satisfied that the petitioner has demonstrated a prima facie case with likelihood of success and declining to grant the same would prejudice the petitioners,” the court ordered.

Judge Makau said insurers shall not suffer any prejudice if the orders are granted.

The Consumer Federation of Kenya (Cofek) which is supporting the petition filed by the Kenya Human Rights Commissions was enjoined in the matter as an interested party.

The Association of Kenya Insurers the umbrella body of all insurers had opposed the application by KHRC and asked the court not to grant the orders.

AKI claimed that not all the insurance firms had increased their premiums as  claimed by the petitioners.

The Insurance Regulatory Authority was put to task by the judge on their mandate  after it said KHRC had wrongly included them in the petition.

IRA told court that the insurance firms should be ones to be sued and not them claiming that their mandate is limited as regards that section of the insurance act.

This left the judge questioning who is supposed to regulate the companies and give authority.

“Are you not required to play any role as regards any policies or any directions as regards issuance of insurance covers?,”Makau posed.

“Yes my Lord I agree we are but am saying under section 3 (a) of the Insurance Act, the role of the regulator is to supervise and regulate.  However, the petitioners prayers is directed towards the insurance companies and not us My Lord,” IRA argued.

IRA further told court that the review of premiums is undertaken by insurance companies as private entities that have the right to conduct their affairs.

“If they exceed and do the wrong thing is your body supposed to keep quiet?” the judge posed.

KHRC said it was  surprised by IRA’s submissions because under section 3 (a) of the Insurance Act, the authority is tasked with administration, supervision, regulation and control of insurance business in Kenya.

“In fact under 3(a) ii of the Act they have the obligation to protect the interest of the insurance policy holders and beneficiaries they have to promote a fair safe and stable insurance sector,” KHRC submitted.

KHRC is challenging the decision by insurers to increase motor vehicle premiums.

The lobby group claims that a number of insurers stated through the media a 50% increase of their premiums for comprehensive covers starting this year.

According to court documents, a number of insurance companies have also announced that they will not offer a comprehensive insurance cover for motor-vehicles which are older than 12 years or with a value of less than Ksh600,000.

“considering the mandatory nature of motor-vehicle insurance the said actions of insurance companies are discriminatory, unjustified and illegal,” reads court papers.

In an affidavit by their executive director David Malombe, the lobby group argues that it discriminatory since the said vehicles are still in use and without proper insurance; the said vehicles are a risk to the safety of the public and other road users.

“The said actions also amount to a violation of consumer rights and are punitive, insensitive and oppressive,” he said.

KHRC avers that premiums for the comprehensive cover are tabulated using a definite formula which was 4% of the value of the motor-vehicle.

It is their argument that any amount above that has to be justified and has to involve consumer public participation.

The lobby group says the insurance argument that the increase in premiums is as a surge of claims some of which are said to be fraudulent does not hold.

They faulted IRA for violating its duty to the police holders by allowing insurers to unjustifiably increase premiums up-to 50% with no public participation.

“Considering the mandatory nature of motor vehicle insurance then the said service has to be offered in a manner that protects consumers’ health, safety and economic interests,” reads court papers.

They have also challenged the move by the insurance companies to exclude a specific category of vehicles from comprehensive insurance cover without justification saying it violates the rights of consumers.