insurance takaful conference 27-May-2008

insurance_takaful_conference_27_may_2008_mh.ppt

1. Securities and Exchange Commission of Pakistan
INSURANCE & TAKAFUL
CONFERENCE
27 May 2008

2. Securities and Exchange Commission of Pakistan
Compulsory Motor
Third Party Insurance

3. Securities and Exchange Commission of Pakistan
RELEVANT SECTIONS OF THE SAVED CHAPTER VIII
OF THE REPEALED MOTOR VEHICLES ACT 1939
Section 94–Necessity for issuance against third party risk
•this section prohibits use of a motor vehicle in a public place unless there is in
force a policy of insurance
Section 95 –Requirement of policies and limits of liability
•this section requires issuance of policy of insurance by an authorized insurer
or a cooperative society (allowed under Section 108 to transact the business of
an insurer); covering any liability in respect of death of or bodily injury to any
person caused by or arising out of the use of an insured vehicle in a public
place.
•this section does not require to cover liability
•in respect of an employee engaged
•in driving the vehicle
•as conductor or in examining tickets on a public service vehicle; or
any contractual liability

4. Securities and Exchange Commission of Pakistan
…continued
The policy of insurance is required to cover any liability incurred in respect of
any one accident upto the following limits:
in respect of a goods vehicle
−Rs.20,000 in all, the liabilities if any arising under the Workmen’s
Compensation Act 1923 in respect of the death of, or bodily injury to
employees other than the driver being carried in the vehicle being
limited to six such employees
in respect of a vehicle in which passengers are carried for hire or reward
or by reason of or in pursuance of a contract of employment
−Rs.20,000 in respect of persons other than passengers; and
−Rs.20,000 in all respect of passengers and Rs.4,000 in respect of any
individual passenger (vehicle registered to carry not more than 6
passengers, excluding the driver), or Rs.2,000 in respect of an
individual passenger (vehicle registered to carry more than six
passengers excluding the driver).
in respect of a vehicle of any other class
−the amount of the liability incurred

5. Securities and Exchange Commission of Pakistan
COMPLIANCE OF THE REQUIREMENTS OF SECTION 95
No provision in the relevant laws for checking of certificate of insurance at
Excise & Taxation Offices or authorised branches of National Bank of
Pakistan (where road vehicle tax is collected).
However, under Section 106, a police officer in uniform is authorised to
ask for production of certificate of insurance relating to the use of the
vehicle.

6. Securities and Exchange Commission of Pakistan
“ACT ONLY” LIABILITY INSURANCE COVER
Standard wordings of the coverage
“ Subject to the limit of liability the insurer will
indemnify the insured in the event of accident caused by
or arising out of the use of the motor vehicle in a public
place against all sums including claimant’s costs and
expenses which the insured shall become legally liable to
pay in respect of death of or bodily injury to any person”.

7. Securities and Exchange Commission of Pakistan
Relevant Exclusions to the standard “Act Only” insurance
cover
Except so far as is necessary to meet the requirements of Section 95 of the
Motor Vehicles Act 1939 the insurer shall not be liable in respect of death
arising out of and in the course of his employment of a person in the
employment of the insured or in the employment of any person who is
indemnified under this policy or bodily injury sustained by such person
arising out of and in the course of such employment.
Except so far as is necessary to meet the requirements of Section 95 of the
Motor Vehicles Act 1939, the insurer shall not be liable in respect of death of
or bodily injury to any person (other than a passenger carried by reason of or
in pursuance of a contract of employment) being carried in or upon or
entering or mounting or alighting from the motor vehicle at the time of the
occurrence of the event out of which any claim arises.

8. Securities and Exchange Commission of Pakistan
CURRENT SCENARIO
Hardly 10% of the vehicle plying on the roads are insured with the
authorised insurers.
Remaining 90% of the vehicles either carry legally invalid certificate of
insurance issued by bogus entities or are without any insurance cover.
The genuine insurers, as per a conservative estimate are being deprived
annually of premium worth Rs.4 billion

9. Securities and Exchange Commission of Pakistan
EFFICIENT & EFFECTIVE SOLUTION TO COMPENSATE THE
VICTIMS OF THE ROAD ACCIDENT OR THEIR HEIRS UNDER
SECTION 95
For determining the liability of the driver/owner of the involved vehicle
change the existing basis from “legally liable”to “admission on a no-fault
basis”.
Agreed actions
SEC will advise the respective provincial governments for necessary
amendments in the saved Chapter VIII of the repealed Motor Vehicle Act
1939 with regard to the change from “legally liable”to “admission of
liability on a no-fault basis”and limits of liability any one person (as
per the schedule of benefits of the Workmens’ Compensation Act 1923)
subject to an overall aggregate limit any one accident of Rs.10m.
Until such time the relevant parts of the saved Chapter VIII are amended in
the respective provinces, compensation on a “no fault basis” as an alternate
option be made available by the insurers to road accident victims (or their
heirs) by having the standard policy cover appropriately worded.
for “admission of liability on a no-fault basis” by the owner/driver of
the insured vehicle involved in an accident;
the standardised death and disability benefits will be as per the
schedule of the Workmens’ Compensation Act 1923.
For the success and sustainability of the above scheme, the insurance
companies will not charge premium below the advisory rating structure
developed by the IAP (which will be subject to review).

10. Securities and Exchange Commission of Pakistan
Only authorised insurers to issue the certificate of insurance
Agreed actions
•SEC will provide list of authorised insurers to the provincial governments for
dissemination to all Excise & Taxation offices (E&T) and authorised branches of
National Bank of Pakistan (NBP), in their respective jurisdictions.
•To bring Co-operative Societies (registered under Co-operative Societies Act 1912 to
meet “Act Only” insurance requirement of their members, as provided in Section
108 of Chapter VIII) within the ambit of the Insurance Ordinance 2000, SEC will
advise the provincial governments to repeal Section 108 of Chapter VIII, and direct
such societies either to register themselves under the Ordinance or wind-up.
•SEC will advise the provincial governments to issue instructions (supported by the
amendments in the Motor Vehicles Ordinance 1965 and Motor Vehicles Taxation
Rules 1959) to “E&T” and “NBP” in their respective jurisdictions for mandatory
checking of the certificate of insurance at the time of collection of road tax and
mentioning of certificate of insurance and name of insurer on road tax challan.
•IAP, in consultation with SEC, will evolve an effective system to ensure that fake
certificate of insurance are not accepted by “E&T” & “NBP” (e.g. introduction by the
insurers of compulsory insurance stickers with security features).
•IAP will display list of authorised insurers at “E&T” and “NBP”.
•As a community service, IAP/SEC will jointly advertise creating awareness amongst
the vehicles’ owners to act as responsible citizens by purchasing genuine insurance
covers from the authorised insurers thereby financially assisting the unfortunate
road accident victims (or their heirs).

11. Securities and Exchange Commission of Pakistan
Thank You!