In a precedent ruling, the High Court has given Kenyan insurance firms the green light to set vehicle underwriting premiums without interference from regulatory bodies. The ruling by the High Court was based on a case that was dismissed, filed by the Kenya Human Rights Commission in 2022, accusing insurance firms of raising premiums for older vehicles.
History of the Case
The KHRC had filed a petition arguing that insurers, by increasing the premium for vehicles older than 12 years or those valued below KSh 600,000, were acting without reasonable basis and in contravention of consumer protection principles. The IRA and the AKI were listed as respondents.
However in it’s finding, the court ruled that, in a free-market economy, insurers are free to fix a price appropriate for the prevailing market circumstances. Justice Mugambi noted that there was no legal requirement placed on the IRA to approve or control premium rates that insurance companies could charge.
Consequences of the Ruling
Following the striking out of the injunction against the rise in premiums, now insurers may:
- Charge higher premiums for high-risk vehicles, especially the older models.
- Deni comprehensive cover for those vehicles perceived to be too risky.
The latest move is aimed at slowing down the bleeding in the motor insurance segment that has consistently registered losses. According to data from IRA, insurers registered an underwriting loss of KSh 5.92 billion during 2023 from a loss of KSh 7.59 billion in the prior comparable year.
Industry Response
The Association of Kenya Insurers stated that premium pricing was influenced by various variables that include:
- Policyholder’s claims experience
- Future losses expected
- The aggregate risk profile of the insured fleet
AKI stressed that the premium increase was essential to ensure the future viability of motor insurance, which has traditionally been a loss-making class of business.
Decision of the Court
This decision comes after a similar ruling by the Court of Appeal in September 2024, where the court maintained that it was within the right of insurers to set their minimum premiums. The appellate court rejected guidelines that the IRA had introduced in 2009 setting the minimum premium at 7% of the value of the vehicle as being unreasonable and disproportionate.
Consumer Concerns
Although this has been welcomed by the insurers, saying the new arrangement reduces their losses and consequently allows some sense of stability in the market, for consumers, comprehensive cover might become costlier, if not unavailable. KHRC had earlier criticized the move as “punitive and oppressive” to low-income vehicle owners.