We are receiving several calls and enquiries in relation to the substantial hike in Motor rates announced by the Kenyan insurance market at the start of the year. These increases have been questioned on the back of a recent appeal and court case, and it has since been reported that these increases have been suspended. We would like to give you the facts as we know them, and we will advise you further, as, and when we find out more information.
What is the Context?
The Insurers started imposing new minimum rates to Fire, Consequential Loss, Engineering and Bonds at the beginning of 2021, which we made you aware of via a series of blogs . The new minimum rates were forced on the Kenyan insurance market by local reinsurers. Fundamentally, non-compliance by Kenyan Insurers resulted in the reinsurances being null and void, leaving insurance purchasers fully exposed on claims. In summary, there was no choice but to comply with the rate increases.
How is it affecting Motor rates?
Regrettably, these same reinsurers are now applying the same principal to most other sectors and the one affecting a large percentage of the public and businesses, are the Motor rates. From a minimum, standard Comprehensive rate for a KES 1m vehicle of 3.5%, this now rises to 6%. For a Commercial Vehicle it used to be 4.5%, it is now 5%, and for Motor Fleets the new minimums start at 5% for a Private Car Fleet. Remember this is without any of the extensions that are available, like excess protection, loss of use, terrorism, etc.
Interestingly for those able to drive a private car valued in excess of KES 2.5m, your base rate is reduced to 3%! So, if you have a car worth KES 1.5m you will pay KES 90,000, whereas if you insure it for KES 2.5m, you only pay KES 75,000. Higher value but lower premium! No, it doesn’t make any sense, and like all the other rate increases it has not been considered by those making the rules.
We have been asked by some clients as to whether the loading of Motor rates is a ‘contempt of court’. We have not seen the legal papers, and from our enquiries, it appears neither have the Insurers! The fact is, we all have to understand that the previous rates were ‘minimum’ rates, so any Insurer can apply rates above those, but not lower. Motor insurance loses substantial sums for Insurers, so even if this legal decision is upheld, Kenyan Insurers could still apply these new rates.
What happens now?
We are talking to our current partners and potential new ones, and for January renewals for all JWS clients we have obtained a moratorium on the increases. This week and next, we will be having high level meetings with all Insurers and will up-date you all as quickly as possible. If you have received a renewal invite from us for a renewal after 1st February, kindly hold onto this until we can advise you further. It maybe that the new proposed premiums will not change, and if they do we will let you know immediately.
On behalf of our industry, we apologise for the uncertainty and upset this may have caused.
Please contact us for more information – email [email protected] or call us on +254 (0) 709 455026.