The Motor Insurance Industry in Kenya: Adopting the No-Fault Insurance System

Abstract

This research paper seeks to evaluate the Kenyan insurance industry which is based on the fault law, its shortcomings and the applicability of the no fault system to cure the ills of the fault insurance regime in this country. The study will also heavily refer to the New Zealand no fault law. The choice of reference for New Zealand is informed by the commonalities of the common law legal system in Kenya and New Zealand and the population of both countries. The fault insurance is always said to be a social symbol, a cultural mirror that reflects the morals of society. It focuses on the party at fault. The no-fault system on the other hand is an administrative remedy that is largely devoid of a moral content. This system is used to describe any type of insurance contract under which insured persons are indemnified for losses by their own insurance company, regardless of fault in the incident generating losses. Thus the injured parties are compensated by the insurance companies without proof of fault. They are also restricted in the right to seek recovery through the civil justice system for losses caused by other parties. The main goal of the no-fault insurance is that of lowering premiums costs by avoiding expensive litigation over the causes of accidents, while providing quick payments for injuries. In that regard this research paper will mainly focus on the two systems, identifying the pros and cons of each system and finally recommending which system would be suitable for Kenya. In some instances however, the two systems can be used interchangeably. In uncertainties, the standard liability procedure can be invoked or the courts can be allowed to handle cases in instances where the damages exceed a certain amount. This study will also evaluate this option in regard to the Kenyan industry. This research paper will seek to review the place of the injured party both under the fault and the no fault systems and the adequacy of damages in both instances and then provide the way forward. The main basis for the recommendation of adoption of the no fault system stems from the fact that, the no-fault system provides for prompt payment to accident victims regardless of how the accident happened or who was at fault. Unlike the current insurance regime in Kenya where an injured party has to file a suit to recover damages in regard of a motor accident, the no fault system offers faster settlement of damages and is more efficient as it avoids delays, expenses in litigation and uncertainty. In Kenya for example, seriously injured victims are collecting nothing from the insurance industry and most are getting inadequate compensation after several years of attending court hearing.