ISLAMABAD, Sept 4: Securities and Exchange Commission of Pakistan (SECP) has directed the insurance companies to advertise their services in the area of vehicles third party insurance to eliminate the menace of fake certificates.
The objective, Syed Itrat Rizvi, SEC Commissioner (Insurance) said, was to let the people know the names of genuine insurance companies so that they should not waste their money on purchasing fake certificates of “insurance companies” that do not exist.
To begin with, the operation to regularise the third party insurance will be launched in Punjab and Sindh.
The number of vehicles on the road currently was over 4.5 million. Each year, well over 1,20,000 new vehicles are registered all over Pakistan.
Apart from new vehicles, which obtain comprehensive insurance policy at the time of registration, most other vehicles, particularly, in Karachi, are required to obtain insurance coverage for third party.
However, agents of fictitious insurance companies have installed their agents outside the offices of Excise and Taxation departments in all the provinces, and they sell their certificates cheap. And the owners of vehicles purchase these in order to satisfy the Police and avoid penalty, Mr Rizvi observed.
The money thus spent just goes down the drain, whereas the Third Party insurance means to compensate those injured in accidents and save the owners of vehicles involved from expenses.
It was, however, for the insurance companies to ensure that the police refuse to accept fake certificates by letting them have the list of genuine companies that offer third party insurance, he added.
Mr Rizvi, who joined the SECP recently, indicated in reply to a question that some of the insurance companies had failed to submit certificates from the credit-rating agencies for their ability to settle their clients’ claims.
Out of a total of 48 registered insurance companies in Pakistan, 25 failed to produce reinsurance certificates from foreign companies. Even those who were successful in obtaining the certificate faced various difficulties. Foreign companies, it was found, were reluctant to harbour any risk owing to the uncertain conditions prevailing in the region.
In view of this state of affairs, the SEC allowed the remaining companies to get themselves rated by the two credit- rating agencies of Pakistan. Some of these companies are so small with as small paid-up capital as Rs 1.5 million. Obviously, such companies could not be expected to settle insurance claims of their clients.
Meanwhile, the deadline (December 31, 2002) given to insurance companies for raising the paid-up capital to Rs50million for saving their registration was drawing near. “We expect that many of them would already have set in motion the process in this regard,” the SEC Commissioner remarked.
Already a requirement of the Insurance Ordinance, 2000, he said, this would substantially improve the credibility of Pakistani insurance companies and help them expand their business.
In view of the new developments in the insurance business and its expanding role in the capital market, particularly, as regards the management of pension funds etc., this ceiling would be further elevated to Rs80 million by December 31, 2004.