Court rules on 50% hike for insurance premiums as older cars face exclusion

The High Court of Kenya has ruled that insurance companies, as private entities, are entitled to determine their premium rates and coverage terms, provided they adhere to existing laws. 

This decision was rendered in a case filed by the Kenya Human Rights Commission (KHRC) against the Insurance Regulatory Authority (IRA), which challenged alleged premium increases and vehicle exclusions from comprehensive insurance cover.

Justice L.N. Mugambi, delivering the judgment on December 20, 2024, dismissed the petition, stating that the issues raised fell within the realm of private contractual relationships and not constitutional law. 

The court held that insurance companies operate in a free-market economy, allowing them to set terms based on their assessment of risk factors and market conditions.

Petition Claims Discrimination and Lack of Public Participation

The Kenya Human Rights Commission had filed the petition, claiming that the Insurance Regulatory Authority had failed to protect consumers.

KHRC argued that insurance companies should not be allowed to increase premiums by up to 50% and exclude vehicles older than 12 years or valued at less than Sh600,000 from comprehensive coverage. 

The petitioner argued that these changes were discriminatory and made without public participation, violating Articles 10, 27, and 46 of the Constitution.

The petitioner further alleged that these actions disproportionately affected low-income earners, many of whom rely on older vehicles for their livelihoods. 

The KHRC sought a declaration that these changes were unconstitutional and called for their nullification.

Court’s Ruling

In its ruling, the court emphasised that the determination of insurance premiums and coverage terms is a contractual matter between private parties. 

Justice Mugambi noted that insurance companies, as private entities, are at liberty to assess and select the risks they wish to underwrite.

The court stated that the Insurance Regulatory Authority is not mandated to dictate premium rates or approve the terms of comprehensive insurance covers. 

Instead, the regulator’s role is limited to overseeing the compliance of insurers with existing laws and protecting policyholders within the scope of its mandate.

The court also addressed the constitutional validity of the petition, stating that the issues raised did not meet the required threshold for a constitutional claim. 

Justice Mugambi observed that the petitioner had failed to provide sufficient evidence to substantiate claims of discrimination or the alleged premium hikes.

The judgment noted that no affidavits from affected motorists or specific details about the implicated insurance companies were presented.

Implications of the Judgment

This ruling affirms the autonomy of insurance companies in determining their business practices within the bounds of existing laws. 

While the petition was dismissed, the judgment highlighted the need for consumers to pursue their grievances through appropriate regulatory channels rather than constitutional litigation.

The Kenya Human Rights Commission’s petition was dismissed, with each party bearing its own costs, given the public interest nature of the case.