Relief for motorists as court suspends new insurance rates

Motorists have been handed a big relief after the High Court suspended a decision by insurance companies to increase premiums for comprehensive and third party covers.

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

All these will remain suspended pending determination of a petition filed by the Kenya Human Rights Commission (KHRC).

“Having considered the application and careful evaluation of the same, I find that the petitioner has demonstrated a prima facie case with a likelihood of success.

“I therefore grant the orders as prayed pending the hearing and determination of the suit,” ruled Justice Makau.

The insurance companies, under the Association of Kenya Insurers (AKI), had increased premiums charged on vehicle insurance from January 1, arguing that the higher premiums would cushion them against perennial losses in the motor insurance business.

Some of the companies had started implementing the new rules and set a minimum of Sh45,000 for vehicles valued under Sh1 million while others declined to issue comprehensive insurance cover for vehicles older than 12 years and valued at Sh600,000 and below.

The human rights lobby group, in its application, argued that the move was illegal and accused Insurance Regulatory Authority (IRA) of acting illegally in sanctioning the increase of premiums and locking out motorists from comprehensive cover without due process.

According to KHRC, the new regulations by insurers were discriminatory, punitive and go against consumer rights to access services at a reasonable cost.

The commission, through lawyer Kelly Malenya, argued that considering the mandatory nature of motor vehicle insurance, the services should be offered in a manner that protects consumers’ health, safety and economic interests.

“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 justification equally violates the rights of consumers,” said Mr Malenya.

He submitted that IRA failed to tame its members and instead allowed them to thrive while trampling on motorists by allowing the insurance companies to increase premiums by up to 50 per cent without involving the public and consumers.

He dismissed claims of losses being made by the insurance companies as a basis for increasing the premiums, arguing that the firms are to blame for failing to stem fraudulent claims and that the financial burden cannot be passed on to the consumer without public participation.

“Most of the companies have attributed the increase of premiums to a surge of claims, some of which are fraudulent. This is not a reason to increase the premiums, considering that the law provides safeguards which allows them to repudiate claims that are not genuine,” he said.

Justice Makau agreed that failing to stop the new premiums will prejudice thousands of motorists, noting the insurance firms will not suffer any damage if they maintain the previous premiums until the dispute is determined.

The judge also allowed an application by the Consumers Federation of Kenya to be joined as interested party.

He gave the parties 21 days to file their responses.

The case will be heard on February 24.