Battle looms as AIG challenges insurers association

By John Oyuke

A major legal battle is looming in the insurance industry pitting AIG Kenya against Association of Kenya Insurers (AKI) after the underwriter was struck off the association’s roll of members.

At the centre of the storm is the employer’s liability insurance, which the association advised its members to stop selling but AIG ignored the call.

The association has spent much of the last few months building solidarity among its members to forgo underwriting the class of business.

AKI members, in a meeting on March 26, passed a resolution to cease underwriting the business with Executive Director Tom Gichuhi warning that effective that day no member shall sell the policies.

AIG Kenya maintains it cannot stop selling employers’ liability policies because it would violate anti-trust laws of America.

However, AIG Kenya, an American Company and a leading provider of the business in the country, resisted the move resulting in suspension from AKI membership. In a circular copied to all chief executive officers of AKI member companies, Gichuhi said that AIG Kenya Company Ltd has been also suspended from all committees of the association effective June 11.

"Members are advised to desist from having any business dealings of any nature with AIG Insurance Company," said the circular dated June 12.

The genesis of controversy is High Court judge Mr Justice Jacktone Ojwang’s March 4, ruling in which he nullified nine sections of the Work Injury Benefits Act (WIBA) 2007 following a petition by the Law Society of Kenya.

Cartel-like behaviour

AIG Kenya Managing Director Japh Olende, however, rejected the suspension and maintained the action suggested by AKI amounted to cartel like behaviour against the insuring public and against its business principles.

Olende said the AKI’s Resolution No.18/2009 was against Restrictive Trade Practices, Monopolies and Price control Act, Cap 504 of the Laws of Kenya.

"Besides, our feeling was that since the Government had appealed against the ruling deleting nine sections of the Work Injury Benefits Act , it was important to give it time to go through the legal process," Olende said.

The WIBA Act, which was gazetted on June 2, last year, repealed the Workmen Compensation Act Cap 236 and seeks to provide for compensation to all employees for work-related injuries or diseases contracted in the cause of employment.

Specified time

Under WIBA, the Director of Occupational Safety and Health was required to process compensation based on predetermined amounts within specified time period thus avoiding lengthy and costly court processes.

Ministry of Labour thereafter asked the Attorney General to institute an appeal and obtain a stay order against the nullifications to restore normalcy in the labour market. Olende said AIG being an American Company is bound by anti-trust laws of America.

AIG reiterated its objection to being forced to stop underwriting the business class by AKI through its Lawyers Mohammed Muigai Advocates.

The law firm said the directive and resolution 18/2009 are in violation of the law specifically Section 4, 6 and 7 of the Restrictive Trade Practices, Monopolies and Price Control Act, CAP 504 of the Laws of Kenya.