Insurer threatens to cancel Kenya Power car policy
What you need to know:
- Canon Assurance says claims against electricity distributor have created losses.
- Kenya Power have created a loss ratio of 124 per cent when weighed against premiums paid by the electricity supplier.
Canon Assurance has threatened to terminate Kenya Power’s Sh220 million motor vehicle insurance policy if the electricity supplier does not double payable premiums.
The underwriter says the number of claims against Kenya Power have created a loss ratio of 124 per cent when weighed against premiums paid by the electricity supplier, which Canon says is unsustainable.
Details of the standoff have been revealed in a suit filed by Kenya Power’s policy agents, HP Insurance Brokers, seeking to stop Canon from terminating or changing the terms of the contract.
Canon, in a letter to HP Brokers, says the claims against the power distributing company are excessively high and that the underwriter cannot sustain the rate of compensation for the duration of the contract without raising premium rates.
The insurance broker negotiated terms with Canon on behalf of Kenya Power after winning a tender to source for motor vehicle insurance for the electricity supplier.
The two-year contract that runs until June 2018 was to see Canon offer Kenya Power a 7.5 per cent premium rate for private vehicles and eight per cent for commercial vehicles.
HP Brokers says Canon has not informed Kenya Power of its intention to double the premium rates. Canon has asked the court to halt all proceedings in the suit filed by HP, and refer the dispute to arbitration as provided for in the contract.
“We note that the business has performed very poorly in respect of loss ratio as per the attached schedules which were shared with you during the meeting. The loss ratio stands at 124 per cent within a period of six months which is not tenable,” the letter, which HP Brokers has attached in court as part of its evidence, states.
“As discussed we wish to revise the terms as follows; motor private 7.5 per cent, motor commercial eight per cent or cancel the policy by giving 60 day cancellation notice with immediate effect.”
But Canon says that the deal with Kenya Power provides for parties to seek a mediator to resolve any dispute that arises before moving to court.
HP Brokers argues that cancellation of the contract could ground operations of the State-owned utility firm, as Kenya Power would be legally able to procure services of another insurance provider after a minimum of three months.
