The High Court will next week decide whether insurance companies will be allowed to hike insurance premiums for Public Service Vehicles.
The matter will be heard inter partes on Tuesday after Direct Line Assurance Company Ltd and Invesco Assurance Company Ltd asked for more time to response to the substantive issues raised by the Matatu Welfare Association.
More that 100 matatu Saccos moved, through lawyer Evans Ondieki, to the court after the two insurers moved to effect a 15 per cent rise in monthly premiums, saying they were not consulted.
They said they were ambushed as they only realised the hike when they went to make their contributions, adding as major shareholders in the sector they should have been consulted.
The Insurance Regulatory Authority and Association of Kenya Insurers have been enjoined in the case.
The hike would bring the new rates to Sh9,005 from the old Sh7, 817 per month for a 14-seater matatu.
“For a 33 seater matautu, it is around Sh15,000 for premiums. But with the 15 percent hike, it may go up to Sh20,000 per month and that is a hefty increase on one item alone,” Mr Mbugua said.
Matatu Welfare Association chairman Dickson Mbugua has termed the move as arbitrary, unlawful and unreasonable. He also says the process that led to the hike was not transparent.
However, the Matatu Owners Association has defended the hike, saying it is meant to force Saccos to ensure their crews abide to traffic laws. Its CEO Wambugu Kanoru says increasing road accidents have made insurance claims expensive.
Money and Markets has since learnt that the process of hiking the premiums kicked off early in the year but the two insurers delayed its implementation as they quietly negotiated with key stakeholders.
While MOA, which owns 80 per cent of Invesco’s shareholding through Public Transport Investment Company, was in support from the beginning, the two insurers reached out to key Saccos to rally behind the planned hike.
Also lobbied was a section of human rights defenders but the insurers went back on a plan to meet Mbugua because they believed he will not budge.
A similar planned hike in May 2012 that would have seen the premiums shoot to Sh16,005 for 14-seater matatus was defeated when MWA went to court.
The insurance companies say they are bogged down by increasing compensation demands as many Kenyans are now aware of their rights and lodge claims even for minor accidents.