PHOTO | FILE Association of Kenya Insurers (AKI) executive director Tom
Gichuhi (left) with Pan African Life chief executive Tom Gitogo at a
press briefing. Parliament has a lauded a new law that establishes terms
and compensation caps for accident victims, which they said is a
victory against fraud.
NATION
Lawyers have opposed a new insurance law likely to render them redundant.
The
Insurance (Motor Vehicle Third Party Risks) Amendment Act, 2013 was
assented to by President Uhuru Kenyatta on December 24 last year.
The
Act, through a structured payment format, provides for maximum
compensation rates in cases of death, or fixed compensation for each
body part, such as broken leg or lost finger, based on an individual’s
age, income, nature and extent of injury sustained, and number of
dependants, among other considerations.
Children up to
five years will be paid a maximum of Sh300,000, those between 5-12
years will receive Sh450,000 while minors between 12 and 18 years will
be compensated Sh600,000.
For example, if a third-party
accident victim loses the tip of his thumb, he will be paid Sh150,000
in compensation, and in case of death, a maximum of Sh3 million may be
paid to his family.
However, the Law Society of Kenya
says Parliament assumed judicial power in determining and legislating
the amounts payable to the injured, which makes the law
unconstitutional.
“The court has to be involved because
it uses a medical report presented by medical experts to assess damages
payable,” said LSK chairperson Eric Mutua. “Parliament ignored the
advice of LSK regarding the legislation.”
The new law
comes as a relief to the insurance industry that has been lobbying for
it through the Association of Kenya Insurers since 2008.
“It
is a big victory against corruption and will have a big impact on the
industry,” said Tom Gichuhi, AKI chief executive officer.
Insurers
have previously blamed the old system for loopholes often exploited by
rogue lawyers, doctors and members of the Judiciary to settle fraudulent
claims running into millions of shillings.
As insurers
celebrate the law, lawyers maintain that the Act denies accident
victims the right to choose between filing a claim in court or talking
directly to the insurance company for settlement. This implies fewer
grounds for a contested suit in court and leaves insurance companies in
charge of the compensation process.
“The compensation
structure is unfair and too complicated for the average Kenyan and is
open to abuse,” said LSK chief executive officer Apollo Mboya.
LAW SUIT
The society said it has instructed lawyer Fred Ngatia to move to the High Court to have the law declared unconstitutional.
It
will not be the first time lawyers will be going to court to challenge
a law touching on third- party insurance claims. In 2008, lawyers
opposed a similar law touching on the payment of compensation for
injuries sustained at work on the same grounds.
According
to Jubilee Insurance CEO Patrick Tumbo, the insurance industry pays an
estimated Sh16.1 billion annually in compensation for motor vehicle
industry-related claims, more than 50 per cent of the total claims
settled in other compensations.
“About three-quarters
of motor vehicle claims are fraudulent. This new law is here to
streamline the industry through structured compensation,” said Mr Tumbo.
Pan
Africa Insurance CEO Tom Gitogo defended the Act which he said offers a
straightforward way of determining the amount of compensation to be
paid out.
Among other complaints lawyers have about in
the Act is that it is very lengthy, too structured, full of jargon and
very confusing especially to a lay man. “Insurance companies are simply
exploring ways of increasing premiums,” LSK’s Mr Mboya said
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