The government is planning to revise the policy of motor third-party insurance to provide maximum protection and facilitation to the policyholders.
Securities & Exchange Commission of Pakistan (SECP) officials told a selected group of reporters on Monday that the motor third-party insurance (MTPI) provides coverage to victims of road accidents or their legal heirs for any bodily injuries and deaths in the aftermath of a road accident.
The MTPI provides protection to accident victims, promotes responsible driving, reduces the financial burden on the government, ensures legal compliance, and assists in market development.
Third-party insurance provides coverage to victims of road accidents or their legal heirs for any bodily injuries and deaths in the aftermath of a road accident.
Across the globe, MTPI is a crucial form of insurance, as it provides protection to accident victims, promotes responsible driving, reduces the financial burden on the government, ensures legal compliance, assists in market development, and plays its role in the fulfillment of SDGs.
Legal Framework
In Pakistan, the subject of MTPI falls under the ambit of the Federal Statute i.e. Motor Vehicles Act (MVA), 1939. Section 94 of the Saved Chapter VIII of the repealed Motor Vehicles Act 1939 stipulates that no person will be allowed the use of motor vehicles in a public place unless there is in force a policy of insurance complying with the requirements as laid down in section 95 of chapter VIII.
Furthermore, the West Pakistan Motor Vehicles Ordinance 1965 also deals with MTPI as it authorizes the registering authority to suspend the certificate of registration if the vehicle is not insured.
In 2000, the National Highways Safety Ordinance (NHSO) was introduced which makes it mandatory to obtain no-fault compensation insurance for any vehicle to be driven on the national highways.
Similarly, Draft Road Safety Act 2022 has been proposed by the National Transport Centre and Ministry of Communications which will repeal all previous acts governing MTPI and bounds the registration authorities to refuse registration if not satisfied that the vehicle is not covered by third-party insurance.
There is a need for mandatory verification at the time of registration of a vehicle as well as the amendments in the Motor Vehicles Act 1939. Moreover, there is a need for the implementation of MTP under the National Highways Safety Ordinance, 2000.
The SECP has also proposed penalties and imprisonment for the issuance of bogus policies and penalties for the absence of MTPI certificate. At the same time, the SECP will lead an awareness campaign, engage with enforcement agencies, and has proposed a waiver of FED for motor insurance premiums and efficiency and ease in claim lodges.
The major bottlenecks in the current law include the low compensatory limits in case of death, no separate compensation limits for bodily injuries, no enforcement mechanism at the time of registration, and the absence of a no-fault option for claim settlement.
The second layer of impediments is based on implementation issues as there is no mechanism to validate the presence of a genuine MTPI certificate at the time of registration of the vehicle, renewal, transfer of ownership, and driving on the road. There is no enforcement clause in the current law, as per the SECP.
SECP has been working on amendments in MVA since 2015 and all concerned stakeholders have been consulted and taken into confidence.
Commissioner Insurance may also look into bogus third party insurance certificates sold in all districts of the Pakistan.