Motorists can now breathe a sigh of relief following a landmark ruling by the High Court compelling the government and the Insurance Regulatory Authority (IRA) to pay claims to policyholders.
Justice George Odunga on Wednesday, June 8, ruled that the government and the Insurance Regulatory Authority will be held responsible for insurance companies that collapse.
Odunga maintained that the government and IRA will be compelled to settle accident and related claims for policyholders of firms that collapse.
"Where the state fails to protect the insured against unscrupulous insurers yet ensure that the insured take insurance covers at their costs, it is only just that the state takes responsibility for its failure to regulate the players in the industry, otherwise it would be assisting those insurers who use statutes as instruments of fraud," Justice Odunga explained.
Explaining the decision to hold the government responsible and IRA on collapsed insurance firms, Justice Odunga noted that the government and the regulatory body are in the position to establish if an insurance firm is on the verge of going under and take remedial measures.
He, however, insisted that does not imply that the government will bear the obligation for all claims of insurance firms that have collapsed or are on the verge of collapsing.
Odunga further tasked IRA and the government to explain steps it has taken to ensure an insurance firm operates within the law, meets all its obligations before folding, and forestall an insurer from collapsing.
"Insurance companies do not just collapse. Before they do so, there are usually tell-tale signs or indicators which can easily be discerned by hawk-eyed officers of the first respondent, if they are keen enough, instead of waiting until the insurer is unable to meet its statutory obligations before moving in to perform the last rights," Odunga ruled.
The ruling comes at the backdrop of insurance companies going under in the past few months leaving motorists and policyholders stranded.
Even though IRA argues that the policyholder remains protected when an insurance company collapses or files for bankruptcy, the rule has failed to apply in some cases especially those involving motorists.
The Policyholders Compensation Fund plays a central role in complementing regulatory efforts through consumer protection and promotion of market stability.
Despite being at the center of compensation, the anticipated benefits from these funds have not been fully actualised, leaving most claimants unprotected.
But with the landmark ruling delivered by High Court, the government and IRA will now be forced to compensate policyholders.
