High Court suspends 50pc rise in car insurance premiums

Car owners got a reprieve after the High Court on Wednesday suspended insurance providers' decision to increase motor vehicle premiums.

Justice James Makau has also suspended the insurers' decision to exclude motor-vehicles which are more than 12 years old or with a value of less than Sh600,000 from their comprehensive cover.

The judge directed that the Insurance Regulatory Authority (IRA) should not allow implementation of the new rates announced by the insurance companies, pending hearing and determination of a case filed by the Kenya Human Rights Commission (KHRC).

"The KHRC has demonstrated that they have a strong case with probability of success. They have also demonstrated that if the interim orders are not granted the policy holders and the public will be prejudiced. The respondents (the Insurance Regulatory Authority -IRA) stand to suffer no prejudice," said the judge.

 The IRA, together with the Association of Kenya Insurers, had opposed granting of the temporary orders saying that not all insurance companies have increased their rates.

 Insurance Act

They added that the petitioner rushed to court without first raising the issue with the regulator, as required by the Insurance Act.

The suit was triggered by a notice issued by insurance firms informing their customers and business partners of higher insurance rates beginning January 1, 2022.

Some of the insurance companies announced an increase of up-to 50 per cent of premiums for the motor-vehicle comprehensive cover.

In coming up with the new premium rates, the insurers seek to cushion themselves against huge financial losses they have been incurring in the motor insurance sector.

But KHRC, through lawyer Kenneth Malenya, protested and informed the court that the decision of the insurers is punitive, violates the Constitution and amounts to "corporate impunity."

The commission also complains of discrimination. It says it is discriminatory to deny a comprehensive covers to motor-vehicles which are older than 12 years or with a value of less than Sh600,000.

“This is discriminatory since the said vehicles are still in use and it is compulsory to have insurance cover. The said vehicles will be a risk to the safety of the public and other road users," said Mr Malenya.

Third parties

 He explained that owners of motor-vehicles, third parties and the general public will be greatly affected in terms of their economic interests and safety.

 "Policy holders are consumers of insurance services and are entitled to the protection of their health, safety and economic interests," stated the advocate.

 Most of the insurance companies attributed the increase of premiums to a surge of claims, some of which are fraudulent.

This, the advocate said, is not a reason to increase the premiums considering that the law provides safeguards which allows insurance companies to repudiate claims that are not genuine.

It was his contention that the changes were illegal because there was no public participation.

“To unjustifiably increase premiums without consultations and justification violates the rights of consumers. To further exclude a specific category of vehicles from comprehensive insurance cover without,” he stated.

The court also allowed the Consumers Federation of Kenya to participate in the case as an interested party. The case will be mentioned on February 14 to confirm that parties have exchanged their written arguments.