Reprieve for motorists following a landmark ruling made by the Court of Appeal upholding the High Court’s decision to quash the Motor Insurance Underwriting Guidelines.
According to a notice shared by the Commission on Administrative Justice (CAJ), also known as the Ombudsman on Wednesday, October 30, the disputed regulations were introduced by the Insurance Regulatory Authority (IRA) in 2009.
Further, the notice has explained that the guidelines were originally issued to set fixed prices for motor insurance premiums for all insurance companies.
According to the IRA, the move would shield insurance firms from financial losses and ensure that motor insurance claims were paid.
“The court found that the impugned guidelines were irrational, unreasonable, and disproportionate. The court accordingly affirmed and upheld the order of certiorari issued by the High Court in the said judgment to quash the guidelines,” the document read in part.
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Ombudsman Fights for Motorists in Court
However, the Ombudsman challenged the guidelines on behalf of motorists, arguing that the guidelines were unconstitutional.
According to the CAJ, by setting fixed prices, the IRA was overstepping its regulatory powers and infringing on the rights of consumers.
Moreover, the commission argued that the guidelines limited competition, which could potentially turn the insurance industry into a monopoly.
This would be disadvantageous to motorists because it eliminated the incentive for insurance companies to offer quality and affordable services.
Further, the CAJ argued that the guidelines contravened Articles 43 and 46 of the Kenyan Constitution, which protect citizens’ economic, social, and consumer rights.
In March 2017, the High Court sided with the Ombudsman, ruling that the guidelines were unconstitutional and beyond the IRA’s mandate, arguing that while the IRA is responsible for regulating the industry, it does not have the authority to set market prices.
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Court Justifies Squashing the New Regulations
This decision was appealed by the IRA and the Attorney General, who maintained that the IRA had acted within its powers and was justified in issuing the guidelines to stabilize the motor insurance industry.
However, the Court of Appeal through Justice John Mativo, upheld the High Court’s ruling, finding the guidelines to be irrational, unreasonable, and disproportionate.
The court emphasized that regulatory bodies must operate within their legal frameworks, warning against any regulations that might unfairly favour specific companies or turn the industry into a cartel.
Mativo stated that the IRA’s decision-making must be lawful and that failing to do so would render such actions illegal.
This means that insurance companies are free to set their own prices, encouraging competition, potentially reducing premiums, and offering a wider range of products and services to attract customers.
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