Why the law on insurance Third Party Cover is moribund

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In the Kenya Gazette of 14th November 1944, the Governor of the Colony and Protectorate of Kenya approved a bill to make provision against Third Party risks arising out of the use of motor vehicles. This Ordinance was cited as the Motor Vehicles Insurance (Third Party Risks) Ordinance, 1944. Section 4 Subsection 1 of the Ordinance says,“Subject to the provisions of this Ordinance it shall not be lawful for any person to use, or to cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or by that other person, as the case may be, such a policy of insurance or such security in respect of third party risks as complies with the requirement of this ordinance”.

That same Ordinance is now cited as the Insurance (Motor Vehicles Third Party Risks) Act Cap 405 in the laws of Kenya.

It is noteworthy that an owner of a vehicle needs to have security of the said vehicle on the road in form of insurance or other security approved by the Minister as shown in the excerpt of the Act Section 6 subsection 2 as follows, “Whenever such a security is approved by the Minister and deposited with him, the Minister shall give to the owner of the vehicle concerned a certificate (hereinafter referred to as a certificate of security) in the prescribed form, subject to such fee and containing such particulars of any conditions subject to which the security is given as may be prescribed; and where the owner owns more than one vehicle in respect of which such a security has been approved, the Minister shall issue a separate certificate of security or a copy of the original certificate in respect of each vehicle; and where the owner owns more than one vehicle in respect of which such a security has been approved, the Minister shall issue a separate certificate of security or a copy of the original certificate in respect of each such vehicle”.

Having verified that all a person needs is security for the said vehicle on the road it becomes a contravention of the law when the police are instructed by National Council on the Administration of Justice (NCAJ) to arrest anyone without an insurance certificate because all one needs is some kind of security to have the car on the road.

Another issue to note is that some companies in this country do not honour claims, especially those companies doing a lot of passenger service insurance business (PSV) because these deal primarily with third party compensation claims. Claimants sometimes have to wait for decades before they get compensation defeating the purpose of having an insurance cover in the first place. Wouldn’t it be better and faster if the claimants can claim directly from the owner of the vehicle?

Insurance by its very nature means that it stands in place of the insured should a calamity arise. Therefore when one is involved in an accident or is sued because of any motor vehicle accident, he delivers the same to the insurance company who then take up the position of the insured. But what happens, as is the case with some insurance companies in this country, if the insurance company cannot meet its financial obligations to the insured? Then the insured is in hot soup because they will have to compensate the claimant from their own pocket after which they would pursue to claim the same from the insurance companywho might not honour the claim in the first place.

Yet that was never the intended purpose of taking up cover because in most cases the insured will not be in a position to compensate the claimant. Most people in this country have been “auctioned” because they trusted an entity to stand by them in time of need but it did not do so.

There is also another scenario where the insured needs compensation for their vehicle that has been declared a write-off after it was involved in an accident. If the insuring company cannot compensate the insured’s vehicle, of what use is the insurance cover with these companies if they do not meet their financial obligations?

What we have instead is insurance companies minting money and playing with people’s lives even as the insurance regulator looks on. It is high time that motor vehicle insurance was done with more accountability or if not, abolished altogether with people made to carry their own crosses, and given the option of whether to insure or not. It does not make sense to have motor insurance in this country under the present loose culpability environment. In any way, there are countries around the world that do not have compulsory insurance; how do they operate? Maybe it is time some government brass went to benchmark in these countries.

Washington Ndegea

Also Read: Motor vehicle insurance claims settlement in Kenya: Implications

Opinions by contributors are views of respected thought leaders in the respective industries they operate in. The Exchange is a close partner with each of the various opinion contributors.

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