Why insurers want accident cases out of small claims court

However, insurers through the Association of Kenya Insurers (AKI) say the simplicity of procedure and the requirement to settle matters within two months is not enough for them to investigate complex cases such as those involving injuries and deaths resulting from accidents.

AKI Chief Executive Tom Gichuhi said the lobby has written to Chief Justice Martha Koome asking her to consider removing injury-related claims from the small claims courts or extending the period of hearing and settling such cases to 180 days.

“Injury claims are complex and require more time for insurers to conduct investigations to properly document a claim. We live in a very fraudulent world and many people attempt to make money by either creating fictitious claims or magnifying real claims. We are ending up paying claims which otherwise would not have been paid if proper process was followed,” said Mr Gichuhi.

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“The assumption is that these are very simplistic claims, but they are not. The fact that we are not given enough time to carry out adequate investigations exposes us to fraud. Most of the claims that are getting paid are being determined without following the crucial steps that are spelt out in the Insurance Act.

For instance, Mr Gichuhi explains, that 60 days is not enough for claimants to provide evidence like medical reports that contain initial treatment notes, P3, x-ray notes, discharge summary, and medical-legal report. Insurers rely on such documents to determine the amount due or whether to refer the claimant for re-examination.

Insurers argue that the limited period also makes it difficult for them to provide witnesses, in cases where expert witnesses are required.

Mr Gichuhi argues in cases of fatal claims, the time provided is not enough for them to be given crucial documentation such as letters of administration, postmortem reports, funeral expenses, and a letter from the area chief proving the dependents.

Section 32 of the Small Claims Act 2016 provides that the court “shall not be bound wholly by the rules of evidence,” a clause insurers say means the small courts can proceed without taking into account the crucial evidence required to determine insurance claims.

Insurers therefore see the Small Claims Court Act that founded the small claims courts as emasculating the Insurance Act by indirectly imposing on them 60 days for assessing and paying a claim.

The Insurance Act is silent on how long insurers are supposed to investigate matters but requires them to settle within 90 days once they have reached an agreement with the insured party.

The Act allows an insurer who is unable to pay the claim within 90 days to apply to the regulator for an extension of up to 30 days.

“You cannot therefore legislate on the period for processing a claim. The reason behind the 90 days and even the 30-day extension window is purely because there are many people who put in claims and insurers must be able to balance cash flows. You cannot have all claims reported getting paid at the same time,” says Mr Gichuhi.

A 2006 AKI research showed that 95 percent of claims paid and outstanding were up to Sh2 million. Mir Gichuhi says the majority of claims are currently concentrated at up to Sh1 million, meaning that most insurance disputes are being referred to the small claims courts.

Judiciary data shows the small claims court received 41,524 cases in the financial year ended June 2024, marking a 52.8 percent jump from 27,161 in the previous period.

By May 2023, small courts had heard and determined over 27,000 cases valued at approximately Sh4.6 billion, related to insurance as well as other civil and commercial disputes whose value does not exceed Sh1 million.

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