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Nairobi court saves motorists from paying high insurance premiums

NAIROBI: The High Court has quashed the 2009 insurance market guidelines, which were meant to hike pricing for motor vehicle premiums.

The insurance market regulator, Insurance Regulatory Authority (IRA), in the guidelines had set prices of premiums, which all commercial insurance companies would charge vehicles.

The guidelines would have seen general increase in the cost of premiums for all vehicles including the public service ones.

But judge John Mativo Wednesday ruled that IRA had acted over and above its powers and thus the regulations were against the Constitution.

He noted that they were never gazetted and thus could not be termed as the law. The implication of it is that competition in the insurance market continues and a motorist can move to an insurer who is issuing services at an affordable price.

“A declaration be and is hereby issued declaring that the Motor Insurance Underwriting Guidelines issued by the first Respondent in November 20, 2009 are illegal, unconstitutional and therefore null and void for all purposes,” the judge ruled.

The rules were focused on price wars, which had been discouraging new investments and subjecting other insurance firms to struggle to survive and at the same time, incurring high claim bills than the premiums could pay for.

What IRA had done was preventing insurers from charging premiums that cannot support the risks involved.

But Commission on Administrative Justice (CAJ) moved to court saying the regulations were meant to make the pricing of insurance motor cover a monopoly and to convert the industry into a cartel without any supporting legislation.

CAJ told the court that IRA had gone ahead to kill incentives to motorists who are seeking quality services at an affordable rate.

“It is discriminatory to the extent that they give special rights, privileges and treatment to one commercial interest group,” the judge heard.

In reply, IRA told the court that its actions were meant to shield insurance firms from losses and at the same time give a standard to all services.

But Justice Mativo ruled that the powers given to IRA did not include setting up prices and coming up with regulations.

“Fairness demands that a public body should never act so unfairly that it amounts to abuse of power. This means that if there are express procedures laid down by legislation that it must follow in order to reach a decision, it must follow them and it must not be in breach of the rules of natural justice,” he ruled.

He added: “The body must act impartially and the decision must conform with the provisions of Article 47 of the Constitution. I find nothing to suggest, even in the slightest manner that regulation and supervision entails setting prices. I find no express or implied mandate in the statute to suggest the first respondent (IRA) had powers to issue the said guidelines.”