Insurance Firms Exposed After Fraudulent Plot To Hike Motor Vehicle Premiums


Second hand cars at the port of Mombasa / Courtesy

Insurance providers have been left with an egg on the face after it emerged that their recent move to hike motor vehicle premiums was based on a lie.

In a move that sparked outrage from motorists late last year, insurance firms announced an increase of up to 50 per cent of premiums starting this year for Motor-Vehicle Comprehensive cover.

The firms cited losses in the industry as the major reason for the move.

But it has now emerged that the plot to hike the fee was based on falsehood as no losses have been recorded in the industry.

Data from the Kenya National Bureau of Statistics (KNBS) shows while the industry’s financial performance has been declining over the past eight years, it has not incurred any losses.

Notably, the KNBS report shows that between 2014 and 2020 no losses were recorded though profits in the industry dropped by 71.4 percent, from Ksh17.2 billion to Ksh4.9 billion.

Read: Petition Filed Challenging Increase in Motor Vehicle Insurance Premiums

Additionally, the industry recorded a 61.6 per cent drop in profits from Ksh12.8 billion in 2016.

The data also shows that the industry suffered dwindling fortunes as premium incomes rose by Ksh75 billion (or 47.7 per cent). By 2014, the industry’s gross premiums rose to Ksh157.7 billion, further growing to Ksh232.9 billion by 2020.

Over the eight-year period under review, claims in the industry’s general business rose by 34 per cent from Ksh12.7 billion to ksh57.4 billion. Interestingly, when the insurance firms announced increase in insurance premiums they argued that the industry was making losses due to a sharp rise in claims.

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To deal with the purported losses, the companies also announced plans to halt comprehensive insurance cover for motor vehicles that are older than 12 years and those with a value of less than Ksh600,000.

The High Court, however, last Wednesday suspended the planned hike of the premiums pending hearing of a case filed by the Kenya Human Rights Commission (KHRC).

In the petition, the commission through lawyer Kelly Malenya, termed the new terms as discriminatory, unjustified and illegal.

KHRC also told the court that there was no public participation in the review of the insurance premiums.

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“I have considered the petitioner’s grounds in support of the application and oral submissions by both parties. Upon careful evaluation of the same, I find that the petitioner has demonstrated a prima facie case with a likelihood of success,” Justice James Makau ruled.

KHRC argued that the move to hike the premiums and exclude older vehicles from some covers would affect the economic interest and safety of owners of motor vehicles, third parties and the general public.

“Unless the Honourable Court intervenes and halts the changes, consumers will continue to greatly suffer from the said acts of corporate impunity,” Lawyer Malenya said in court documents.

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IRA Data

Data from the Insurance Regulatory Authority (IRA), which was sued by KHRC, shows that between July and September 2021,108,144 claims were closed, out of the 102,641 out-standing claims at the beginning of the quarter.

Further, the insurance firms paid 12,632 claims in the three months and declined paying 66. However, the number of claims reported and revived during the three-month period was slightly higher than those paid-14,989.

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Written by Wycliffe Nyamasege


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