Insurers want compulsory insurance for vehicles

Insurance companies have disagreed with the scrapping of the third-party liability motor insurance's provision in the Road Transport Act which is set to take effect from 1 November.

If the third-party insurance is abolished, it will be obligatory to have a first-party insurance for drivers, helpers, passengers, affected third-party and vehicles. Otherwise, other sectors will also show reluctance to take out insurance, leading to a crisis in the insurance sector, they opine.

A new provision to provide compensation to affected passengers, drivers and third parties from a fund by abolishing the third-party insurance in the law will encourage other sectors to form a self-insurance pool, the insurers said in an inter-ministerial meeting, chaired by Md Jafor Iqbal, additional secretary to Financial Institutions Division (Insurance), on Thursday.

No country has the opportunity to operate vehicles without insurance, not even public transport, they added.

In this context, the Financial Institutions Division has decided to seek an explanation from the Road Transport and Highways Division, regarding the abolition of the third-party insurance in the law.

The Motor Vehicles Ordinance-1983 made the third-party insurance compulsory. There was a provision of a fine of Tk2,000 for not insuring any motor vehicle. No such provision has been made in the new law. The first party insurance is not mandatory, be it in the previous ordinance or the new law.

Although the Road Transport Act, 2018 was passed two years ago, the issue has not come to a discussion until now.

The matter has come to the insurance companies' notice after the Road Transport and Highways Division and the Bangladesh Road Transport Authority (BRTA) sent a letter to the inspector general of police on 4 October, requesting him to stop police from filing  cases against vehicles and imposing fine if insurance papers are not found.

Against this backdrop, the Insurance Development and Regulatory Authority (IDRA), the controlling body of the insurance sector, requested the Ministry of Finance to convene an emergency inter-ministerial meeting.

In the meeting, Md Lokman Hossain Mollah, director engineering wing of the BRTA, said the third-party insurance was mandatory as per the motor vehicle ordinance but the provision has been scrapped in the new law. Traffic police were suing and fining vehicles for not having any knowledge about its annulment.

After receiving several written complaints in this regard, the BRTA wrote to the police chief, seeking a remedy, he added.

AKM Monirul Haque, vice-president of the Bangladesh Insurance Association, said the prime minister had also spoken about abolishing the third-party insurance system on the occasion of Insurance Day. Many countries did the same.

But vehicles, including public transport, do not run without insurance in any country of the world, he added.

He proposed making the first party insurance compulsory.

"If we abolish the provision of third party insurance, we will have to make the first party insurance compulsory. Many aspects of the third-party insurance will be covered in the first party one," said PK Roy, chief executive officer (CEO) of Rupali Insurance Company Limited.

Imam Shahin, CEO of Asia Insurance Limited, said that if the transport sector is exempted from insurance, other sectors will also fall under the self-insurance pool. This will put the insurance companies in trouble.

Abdul Karim, manager of the General Insurance Corporation, said a comprehensive first-party policy should be made mandatory for the transport sector. The third-party insurance has to be kept mandatory until this is done.

Sources said in case of any damage to a motor vehicle under the first party insurance coverage, the owner gets compensation from the insurance company. And in case of loss of life or property of a passenger, driver, helper or third party due to an accident or any other reason, compensation comes under the third party insurance.

But in Bangladesh, despite the frequent deaths and injuries of passengers and pedestrians in road accidents, no one has so far received the insurance benefit.

The Financial Institutions Division also decided to keep a written record inscribed in a visible place of a third-party insured motor vehicle so that victims can get the insurance benefit, but this was not implemented.

The new law calls for the creation of a fund to compensate third parties affected by motor vehicle accidents or any other cause.

Last year, on the occasion of Insurance Day, Prime Minister Sheikh Hasina instructed for abolishing the third party insurance provision.

She said the victims do not get any benefit from this type of insurance. Many countries have repealed this provision.

Transport owners are happy over the exemption from insurance but passengers and transport experts see this as a bad example.

Dr Md Shamsul Hoque, a leading transport expert and professor at Bangladesh University of Engineering and Technology (Buet), told The Business Standard that it has been proven that the number of road accidents reduces due to insurance, road safety is ensured. But it puts drivers and owners in liability.

"Developed countries, including the United States, have kept the insurance system intact. But due to the failure of the regulatory body, we have abolished the insurance system," he added.

He said insurance companies are obliged to pay compensation. But due to the lack of appropriate action by the authorities concerned, they can go away without providing insurance benefits to the victims.

Mozammel Haque Chowdhury, secretary general of the Passenger Welfare Association of Bangladesh, told TBS, "Affected third parties have never received insurance benefits from the insurance companies. How can we believe that they will get compensation from a government fund?"

 Khondoker Enayet Ullah, secretary general of Bangladesh Road Transport Owners Association, told TBS that although the vehicles owners were under the third-party insurance coverage but victims never got any compensation.

The abolition of the third-party insurance is a good decision and everyone will be benefited by it, he said.

In other countries, vehicles are under the coverage of private insurance companies. They pay the victims properly. But in Bangladesh, it is rare that the insurance companies pay properly, Enayet Ullah added.

Basudeb Banik, joint commissioner (traffic south) of Dhaka Metropolitan Police, said they have not filed any case since the BRTA alerted them in this regard.

 "We are not checking the insurance papers of vehicles," he said.

Till September 28, there are over 45 lakh registered vehicles in the country. Of them, over 30 lakh are motorcycles.