Heritage Insurance accounts frozen in Sh100m pay row

Wednesday February 15 2017

Heritage Insurance managing director Godfrey Kioi. PHOTO | FILE

Heritage Insurance managing director Godfrey Kioi. PHOTO | FILE 

By ABIUD OCHIENG [email protected]

Heritage Insurance has suffered a major blow after the court temporarily froze its bank accounts for failing to pay over Sh100 million to its employees whose services were unfairly terminated.

Justice Hellen Wasilwa of the Employment and Labour Relations Court granted the orders in an application filed by 24 former employees who claim that the firm has been reluctant to pay them their dues, despite a judgment in their favour.

The order affects Heritage’s bank accounts at Stanbic Bank, NIC bank, CBA Bank and Diamond Trust bank.

“Pending the hearing of this application inter-parties, an order is hereby granted freezing the operation of all bank accounts belonging to Heritage Insurance Ltd and which are held with the said banks,” ruled Justice Wasilwa.

The labour court had last year, found that the services of 24 former top managers of the insurance firm had been unfairly terminated during the implementation of what the company said was a restructuring exercise to improve its business efficiency.

Abrupt and cruel

Heritage Insurance managing director Godfrey Kioi had stated that the directors and senior managers at supervisor level were affected. However, the affected employees had termed the sacking as, “abrupt and cruel.”

“As you may be aware, the company has been going through a review of structures and implementation of ICT systems. In this regard, some processes have been shortened and some job roles have been merged. As a consequence, some roles have been redefined while others have been rendered redundant,” read the sacking letter signed by Mr Kioi.

In a judgment delivered on June 3, 2016, Labour Court judge Monica Mbaru directed Heritage to pay Sh101,678,336 together with interest accrued amounting to Sh4,195,276 as well as costs amounting to Sh2,843,841.

Heritage is part of Liberty Kenya Holdings Limited which reported last year that it had a 15.3 per cent drop in net profit in the half year ended June, 2016 as a result of higher claims and operating expenses.

Profit drop

The drop in profit came as claims from policyholders increased 41.5 per cent to Sh2.3 billion, with operating expenses also rose 14.2 per cent to Sh1.5 billion.

The insurance sector has in the recent years been forced to operate in a market with increased competition and control of interest rates, thus affecting profits.

The application will be heard on February 23.