Kenya’s High Court suspends insurance firms from hiking vehicle covers by 50%

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  • The High Court in Kenya has suspended a planned move by local insurance firms to hike motor vehicle insurance covers
  • The court told insurance companies not to implement the hike, following a petition by the Kenya Human Rights Commission (KHRC)
  • Justice James Makau also suspended the firms from refusing to offer comprehensive cover for older vehicles
  • The ruling comes after the commission took the country’s insurance regulator to court for not protecting Kenyans

High Court vehicle insurance cover

The Kenyan High Court has suspended a planned move by local insurance firms to hike motor vehicle insurance cover by 50%.

On Wednesday, January 12, 2022, the court told insurance companies not to implement the hike, following a petition by the Kenya Human Rights Commission (KHRC).

Justice James Makau also suspended the firms from refusing to offer comprehensive cover for older vehicles.

Insurance companies had planned to decline, offering comprehensive covers to vehicles older than 12 years or whose value is below KSh 600,000.

The ruling comes after the commission took the country’s insurance regulator to court for not protecting Kenyans.

On January 5, 2022, Citizen Digital reported that the commission had petitioned the court to look into the matter and listed the Insurance Regulatory Authority and the Association of Kenyan Insurers as interested parties.

The commission wanted the court to suspend the hiking of premiums and stop the firms from excluding old vehicles from comprehensive cover.

Rise in insurance premiums 

The ruling comes when a report by the Insurance Regulatory Authority has revealed that insurance premiums went up by 19 per cent in the second quarter of 2021 to hit KSh 144.02 billion (US$ 1.2 billion) compared to KSh 121.04 billion (US$ 1.06 billion) in the second quarter of 2020. 

According to the authority, the general insurance business remained the largest contributor to industry insurance premiums contributing 59.3 per cent of the total premiums at KSh 85.36 billion (US$ 753 million) while long-term insurance premiums stood at KSh 58.66 billion (US$ 517 million) in the period under review. 

According to the data, general insurance business underwriting results reduced significantly from a marginal profit of KSh 62.45 million (US$ 551,000) in the second quarter of 2020 to a loss of KSh 1.46 billion (US$ 12 million) in the second quarter of 2021. 

The authority attributed this to the high increase in loss ratios because of relaxation of restrictions that had been imposed on travel because of the COVID-19 pandemic.

Claims incurred in the general insurance business amounted to Sh32.38 billion (US$285 million) during the period under review, a 15 per cent increase from KSh 28.08 billion ($247 million) reported in the second quarter of the previous year.

“The high premium volume classes of general insurance business contributed the largest proportions of incurred claims; medical (38.7 per cent), motor private (29.8 per cent) and motor commercial (22.8 per cent). Motor classes of insurance business comprised 52.7 per cent of total claims incurred compared to their contribution of 27.8 per cent of the total premium under general insurance business,” the report states. 

The claims paid increased by 16.9 per cent to KSh 30.60 billion (US$ 269 million) compared to Sh26.17 billion (US$ 230 million) paid in the second of 2020.

Medical, motor private and motor commercial had the highest amounts of paid claims at 39.3 per cent, 26.9 per cent and 21.5 per cent respectively of total industry paid claims under the general insurance business.

Reported Claims and Settlements Increases

The authority has earlier revealed that insurance companies received over 2.1 million claims in the second quarter of 2021 a 19 per cent increase compared to the first quarter of the year (1.7 million).

Reported general liability claims went up by 9.8 per cent to 14,766 compared to 13,443 reported in January to March 2021 while general non – liability claims went up by 19.4 per cent to 2,000, 281 from 1,674,507 reported in the previous quarter.

The long-term Insurance business posted an 8.5 per cent increase in the number of claims reported to 91,978 compared to 84,801 claims reported in the first quarter of 2021.

In the quarter under review, the claims payment ratio for general liability claims increased to 9.3 per cent compared to 9.2 per cent in the first quarter.

The claims payment ratio for general non-liability claims increased to 65.8 per cent in Q2 2021 from 64.7 per cent reported in Q1 2021, while the claims payment ratio for the long-term insurance business increased to 73.9 per cent compared to 73.7 per cent observed in the previous quarter.

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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