Cannon Assurance loses Sh220m Kenya Power motor cover

Cannon Assurance has terminated a Sh220 million motor vehicle insurance cover with Kenya Power following a premiums dispute with the electricity supplier.

All Kenya Power staff whose cars were insured by the underwriter through HP Insurance Brokers are expected to switch to a new insurer by January 24.

Cannon wanted to double premium charges for coverage of both Kenya Power vehicles and employees’ cars citing “heavy claims and unprofitability of the portfolio”.

According to Cannon Assurance, 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.

“We regret to advice that Cannon Assurance Limited have terminated the insurance covers in respect of the motor comprehensive policies, citing heavy claims experience and unprofitability of the portfolio,” said Kenya Power in an email to all staff.

Details of the stalemate were first revealed last November in a suit filed by Kenya Power’s policy agents, HP Insurance Brokers, seeking to stop Cannon from terminating or changing the terms of the two-year contract— which was to run until June 2018.

“The matter is in court and we would rather not comment,” said Cannon Assurance brand and marketing manager Wagikuyu Muring’u.
Kenya Power did not respond to our queries by the time of going to press.

READ: Insurer threatens to cancel Kenya Power car policy

HP Brokers had attached a letter from Cannon in its court papers, where the underwriter claimed that the business performed “very poorly” in respect of the 124 per cent loss ratio.

“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,” Cannon said in the letter.

HP Brokers argued, however, that cancellation of the contract could hamper operations of the State-owned utility firm, as Kenya Power would only be legally able to procure services of another insurance provider after a minimum of three months.

Cannon in its response said the claims against Kenya Power were excessively high and that the underwriter could not sustain the rate of compensation for the duration of the contract without raising premium rates.

The insurance broker negotiated terms with Cannon on behalf of Kenya Power after winning a tender to source for motor vehicle insurance for the electricity supplier.

The insurer had earlier preferred the issue be handled out of court saying the deal with Kenya Power provides for parties to seek a mediator to solve any arising disputes before moving to court.

Kenya Power, which employs more than 7,000 staff said in mitigation, it has procured alternative placement of the affected policies with UAP Old Mutual through Canopy Insurance Brokers Ltd as a temporary measure.

“The replacement certificates have already been received at central office. Replacement certificates shall be dispatched to all regions outside Nairobi through regional human resource offices on Monday (yesterday).”

All affected Kenya Power staff have been given up to January 24, to return the Cannon Assurance certificates for onward transmission to the insurer for cancellation and appropriate refund of premium for the unexpired period.