While third party insurance of vehicles indemnifies the insured in the event of an accident against all sums including accruing claims, limited liability repayment of mere Rs20,000 makes the insured too lethargic to claim compensation.

The comprehensive non-life insurance policy does compensate property loss caused to a person other than insured, however, the lack of awareness in public about third party insurance deprives them a tiny but due monetary benefit.

The third party compulsory business is defined as effecting and carrying out contracts of insurance against loss to the policy holder arising from liabilities incurred to third parties in connection with the use of motor vehicles on land. This loss includes injury, casualty, and loss of property. Third party insurance entitles a person(s) without holding an insurance policy to have compensation amount accrued to insured in case of accident caused by him (insured). The insured owes liability to person(s) affected.

There are roughly 48 firms engaged in non-life insurance business. These insurers write billions of premiums annually through comprehensive and accidental insurance policies. But only few of them are exclusively dedicated to third part insurance business.

The reluctance of tariff non-life insurance companies in treating third party insurance business independently lies in low premium gain from policy holders. Tariff non-life insurers (general insurance) indemnify risks of insured comprehensively with charging a substantial annual premium.

In contrast, the minimum rates of premium charged by non-tariff third party insurance companies are Rs129 for motorcycle; Rs238 for car and LTV commercial vehicles; and Rs347 for HTV commercial vehicles. Understandably, insurance companies cannot do business on such low premium.

Notwithstanding, third party insurance business has become a street business. In small shops and on roadside stalls, insurance agents are found busy in engineering policy documents. Agents standing on public pathways in civic centres would usher you to policy maker, who inconsiderate of your concerns and queries tries to convince that the policy saves you from challan, nothing else. The non-tariff insurers issue third party insurance policies and certificates to motorists sometimes in an utter violation of law. Usually, the insurance certificate and policies being issued to the insured are without stamp duty. Even, the forged stamps are used by the unscrupulous insurance companies through their agents. These insurers do not have re-insurance arrangements.

The mode of payment is in cash. Agents and representatives of these insurers have been found involved in fabricating and issuing fake polices on companies’ behalf. They involved in printing illegally insurance policies and certificates.

Talking to the scribe, Zonal Manager of Asian Mutual Insurance Company, Tahir Hussain showed copies of recently purchased forged policies. He said hadn’t they bought it would have affected the firm’s market share. When asked whether the matter was reported to government or any regulatory body, he replied, the muggers have become so courageous that they shrug off laws knowingly. The government is not taking this issue seriously. Some companies claimed to be non-operational in the business of third party insurance, but these so-called closed firms were supplying their stationeries to different agents in a redundant attempt to violate laws openly.

Moreover, some companies are involved in issuing unrecorded certificates causing significant loss to government in terms of taxes and duties such as federal insurance fee, central excise duty, stamp duty, and income tax. It is afraid that these companies could not defray claim payment when required.

One even confided, “Over the last five years, not a single claim has been cleared.” On the contrary, Tahir said that claims were paid but the numbers of lodging claims were abysmally few.

General and life insurance are as necessary as motor third party insurance to curtail the risks for a person.

Beneficiary can get the compensation of loss of property and casualty in the event of an accident, but third person affected may remain at disadvantage end. Therefore, third party insurance concept was conceived to indemnify the risk of third party involved in the accident.

Sarcastically enough, the amount with which indemnification secures a person-sometimes more than one claimant- would not ensure a quality hospitalisation, let alone a property return.

It is clearly mentioned in the third party insurance policy that the limit of company’s liability is Rs20,000. Even after, promulgation of Insurance Ordinance, 2000, section of the Motor Vehicle Act 1939 remained intact: it is held that statutory liability of insurance company under the Act is to be limited to Rs20,000 only for each accident. If the same vehicle is involved in more than one fatal accident on the same date, the liability in respect of each of such accidents would be to the extent of Rs20,000.

The comprehensive insurance underwritten by tariff of non-life insurance companies can defray unlimited compensations to the third party at its discretion and if obliged to any preliminary contract. The insurance firms which only depend on third party insurance business can never pay more than twenty thousand rupees if the rate of premium remains low or they don’t get government’s subsidy.

Few months back, Ministry of Commerce has initiated a proposal to introduce a standard compensation scheme relating to third party liability to be underwritten by registered insurer. It was to be taken up with government. There has been no follow ups despite a lapse of five months..

A majority of people take insurance policy to save themselves from penalty. In other words, to refrain from penalty of Rs50, they subscribe to third party insurance policy. Without knowing the authenticity of insurers, what they least do is to pay few hundred rupees for a certificate.

The people barely go through the insurance policy paper-- a two-paged policy document. Again, lingua franca arises! The policy is written in English language. And, legal epithets dissipate chances of readability.

Ever since, ticket system has been introduced vehicle owners have become unconcerned about penalty for not holding of motor third party insurance policy. They get through paying little penalty. People should be motivated to subscribe to third party insurance. And they should be also assured that their premium amount is not going in waste and the claims will be paid. SECP being the regulatory should curb bogus third party insurers and the compensatory amount should be increased.

To encourage people to take third party insurance policy, Excise and Taxation department must insist on insurance policy while transferring of vehicle ownership and during token season. Similarly, Regional Transport Authority can do the same while issuing permit to commercial vehicle. The policy holders at the same time must be educated about the merits of policy.


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