Seven insurers in trouble over compensation delays

Feuds over delayed payments by insurance firms for car repairs have escalated to the CAK.

Feuds over delayed payments by insurance firms for car repairs have escalated to the competition watchdog, with garage owners latching onto a recently adopted legislation that seeks to assist firms with weaker bargaining power to push for a settlement.

Records show that in the financial year 2022/23, the Competition Authority (CAK) intervened on behalf of several motor repairers, forcing at least seven insurance companies to settle delayed payments.

The watchdog found the insurers in breach of Abuse of Buyer Power (ABP) rules by unjustifiably delaying payment. The ABP regulation became effective in 2018 following a crisis of non-payment of suppliers by supermarkets.

The CAK found that the insurance companies not only had buyer power over these motor repairers in their panels but also abused this power by unjustifiably delaying payment.

The insurance companies were forced to settle payments amounting to Sh24,075,773 million which they had unjustifiably delayed, according to the CAK.

“There has to be a supplier-buyer relationship and a buyer has to abuse that relationship,” said the Acting Director-General for CAK Adano Roba.

“We have no problem if the issue is reconciliation, the problem is unjustifiable delays,” he added.

The insurance firms that were found guilty of abusing their buyer power and forced to pay garages included Kenya Alliance, which paid three garage owners a total of Sh2,625,134. Saham MUA Insurance paid Sh2,616,904, Kenya Orient (Sh906,470.50) and Monarch Insurance (Sh422,472).

Kenya Orient, Invesco and Trident collectively paid 15 members of the Kenya Motors Repairers Association (Kemra) a total of Sh17,199,041.12, even as several other claims were dismissed for having occurred before the ABP provision became effective in 2018.

According to CAK, there are 38 companies in the insurance market offering general insurance services against 168 motor vehicle garages registered under Kemra.

This imbalance makes garage owners beholden to insurance companies. Most of these garage owners, according to the competition watchdog, do not influence the determination of contract terms.

“In addition, insurance companies enjoyed a ready market of service providers therefore allowing them to easily switch to other service providers,” said CAK.

Although the law on abuse of power started with the retail sector, most of the cases that the CAK has been handling have been from the insurance sector.

Before the law on ABP came into force, there was no recourse for delays or non-payment by insurance companies, according to Tom Gichuhi, the chief executive officer of the Association of Kenya Insurers (AKI).

Mr Gichuhi said the payment delays might be due to investigations as there have been several instances of fraud, both from garage owners and motor vehicle assessors.

“There are also situations where repairers do not use recommended materials like spare parts,” Gichuhi.

Some garage owners, for example, instead of using new spare parts will use old parts but then invoice according to assessment.

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