ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has decided to take some major steps including amendments in the Motor Vehicles Act (MVA) 1939 to increase the coverage of Motor Third Party Insurance (MTPI).
Officials told Business Recorder on Monday that the motor 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.
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.
In Pakistan, the subject of MTPI falls under the ambit of the Federal Statute, i.e., Motor Vehicles Act (MVA), 1939.
As per the Pakistan Bureau of Statistics (PBS), there are over 30 million registered vehicles in the country. The data collected from authorized insurance companies revealed that there were only 621,183 insurance policies in 2021 and 650,282 policies in 2022 which insured 830,203 vehicles in 2021 and 912,994 vehicles in 2022 reflecting 2.77% coverage in 2021 and 3% coverage in 2022. PBS further reported a total of 10,379 road accidents in 2021, affecting 17,667 families.
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 absence of no-fault option for claim settlement.
The second layer of impediments is based in implementation issues as there is no mechanism to validate presence of genuine MTPI certificate at the time of registration of vehicle, renewal, transfer of ownership and driving at the road. There is no enforcement clause in the current law, they said.
According to the sources, the SECP has been working on amendments in MVA since 2015 and all concerned stakeholders have been consulted and taken into confidence.
Major amendments proposed by the SECP included:
(i) The introduction of the “No Fault Option” whereby the claim for death or bodily injury shall be payable to the victims of the road accidents or their legal heirs without obtaining any court’s order and irrespective of the fact as to whether or not the insured was at fault.
(ii) The definition of the insurer was replaced such that only insurers registered under the Insurance Ordinance, 2000 will be authorized to issue such policies.
(iii) To increase the compensation limit in case of death from Rs. 20,000 to Rs. 500,000.
(iv) To introduce compensation limits separately for bodily injuries.
(v) Prescription of minimum premium tariff.
(vi) Motor registration authorities will ensure availability of effective insurance policy at the time of registration of vehicle.
(vii) Elaborations of penalty amounts and power to alter the schedule of compensation limits.
(viii) Penalizing companies, intermediaries, printing houses or any other individuals involved in issuance and spread of bogus motor third party insurance certificate with fine and/ or imprisonment
Considering the current status of the motor third party insurance in country, impediments in the current law and lack of its implementation, and inadequate role of stakeholders, it is need of the hour to take a few steps.
There is a need for mandatory verification at the Time of Registration of Vehicle, as well as, the Amendments in Motor Vehicles Act 1939.
Moreover, there is a need of implementation of MTP under National Highways Safety Ordinance, 2000.
The only Authorized Insurance Companies should issue MTP Insurance Policies.
The SECP has also proposed penalty and imprisonment for Issuance of Bogus policies; penalty for absence of MPT Insurance Certificate. At the same time, the SECP will lead awareness campaign; engagement with Enforcement Agencies; proposed waiver of FED for Motor Insurance Premium and efficiency and ease in claim lodges, officials added.
Copyright Business Recorder, 2023