Directline in bid to block SK Macharia’s adverts

City billionaire and media mogul SK Macharia. FILE PHOTO | NMG

The management of Directline Assurance has moved to court to stop businessman Samuel Kamau (SK) Macharia from running cautionary adverts, warning the public against dealing with the insurer.

In a court filing, the insurer's management wants the advertisements stopped--a move that is likely to escalate the fight with Mr Macharia who is also a key shareholder of the firm.

Directline management, through Andrew Mmbogori Advocate, has taken issue with what it terms “reckless and false statements to policyholders and the general public” claiming that the insurance covers issued by the insurance company are invalid.

Besides resulting in a drop in its revenue, the advertisements have caused unnecessary panic and turmoil in the Public Service Vehicle (PSV) insurance industry in Kenya in which Directline controls 60 percent of the market.

“...it is in the interests of justice that this court intervene,” said Directline in a court filing dated January 7. The case will be mentioned on January 22 for further orders.

Directline says Mr Macharia, who has a stake in Directline through Royal Credit, has been running adverts asking the members of the public to stop doing business with the insurer, noting that the company's cover is “invalid” due to the “illegal” alteration of the share registry.

Mr Macharia’s position has been rebutted by the Insurance Regulatory Authority (IRA), which is listed as one of the respondents in the suit.

The IRA insists that the insurer is validly registered and must continue to pay claims arising from the Sh4.86 billion in premiums receivers from its 120,000 policyholders while selling new covers to willing clients.

“All insurance policies issued by Directline remain in full force and effect. Policyholders are assured that their contracts remain valid, and the insurer is fully liable for any claims arising therefrom. Any purported status to the contrary is void of legal effect,” said the chief executive officer of IRA Godfrey Kiptum on December 23, 2024.

Emboldened by IRA’s backing, the management of Directline has opted to challenge one of its powerful shareholders in court as the risk of losing business to its rivals becomes clearer.

Directline is the biggest insurer of commercial PSVs, having received over half of the industry's premium by covering matatus and long-distance buses. The PSV segment covers motorists and passengers from death, injuries, and vehicle damages resulting from accidents.

Data from IRA shows that in the first quarter ending March 2024, Directline Assurance had a market share of 59.79 percent premium underwritten for commercial PSVs, down from 64.95 percent in the similar period.

Competition has been heating up with President William Ruto-linked Africa Merchant Assurance (Amaco) recording a jump in its market share in this segment to 27.77 percent in the review period from 11.4 percent in a similar quarter in 2023.

Since its founding two decades ago, Directline has carved out a niche by offering insurance covers to accident-prone matatu businesses, a feat the company claims has been enabled by prudent risk management.

Other players in this segment, such as Invesco, have since gone bust, pointing to a risky business that most risk-averse players have not ventured into.

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