News Desk: In view of the demands of the insurance owners, the initiative has been taken to make vehicle insurance compulsory again. For this reason, the Ministry of Finance has asked the Insurance Development and Regulatory Authority (IDRA) for a clear proposal on how to make motor vehicle insurance compulsory by amending the Road Transport Act 2018. After receiving the recommendation from IDRA, a written recommendation will be sent from the Ministry of Finance to the Ministry of Road Transport for amending the Road Transport Act.
According to sources concerned, third party risk insurance was mandatory under Section 109 of the Motor Vehicles Ordinance 1983 and under Section 155 there was a provision of penalty. However, in the new Road Transport Act 2018 third party insurance has been removed. At the same time, vehicle insurance is left at the owner's discretion. That is, one can insure his vehicle if he wants to, but if he doesn't there is no problem.
Bangladesh Road Transport Authority (BRTA) published a circular in this regard in October 2020. After that, in December of that year, third party risk insurance was removed by the insurance regulatory body Insurance Development and Regulatory Authority. Since then, owners have largely stopped insuring transport. The vast majority of vehicles currently in operation are uninsured. Especially motorcycles are running without insurance.
Those involved in the insurance business demanded that vehicle insurance should be made compulsory after third party risk insurance was removed. However, as there is no opportunity to make comprehensive insurance compulsory, the insurance people are looking for alternative ways. Several inter-ministerial meetings have been held in this regard with the participation of insurance owners. There was a discussion about launching a new insurance product on the model of third party risk insurance.
According to the relevant sources of the Ministry of Finance, some rationale has been presented for the recommendation that has come regarding making motor vehicle insurance compulsory. Among them, a report of the Road Accident Research Institute (ARI) of BUET has highlighted the data and said that the loss due to road accidents in the three years from 2018 to 2021 is about Tk 1 lakh 9 thousand crores.
Again, according to a statistic of the Passenger Welfare Association, in 2022, 9 thousand 951 people died in 6 thousand 749 accidents and 12 thousand 356 people were injured. In this case, if motor insurance was compulsory, a system of compensation would have been in place in the society.
Several responsible officials of the Ministry of Finance said that motor vehicle insurance is mandatory in the outside world. But third party insurance has been removed in the new Road Transport Act. It leaves motor vehicle insurance at the discretion of the owner. It is a wrong decision. For this reason, an initiative has been taken to make motor insurance compulsory again. For this purpose, a proposal has been sought from IDRA to make Comprehensive Insurance or Act Liability Insurance (Third Party Insurance) compulsory in the Road Transport Act.
In this regard, the letter given to the IDRA Chairman from the Financial Institutions Department of the Ministry of Finance has stated that comprehensive insurance or Act Liability Insurance (Third Party Insurance) should be made compulsory in the case of motor vehicles in the Road Transport Act 2018. The Ministry/Department concerned will be requested to incorporate the provision as mentioned in the Act. For this purpose, a clear proposal with proper rationale is required to include the issue of making motor vehicle insurance compulsory.
When contacted, the Deputy Secretary of the Financial Institutions Department of the Ministry of Finance. Zahid Hossain said that according to the Road Transport Act-2018, motor vehicle insurance is not mandatory. The law needs to be amended to make motor insurance compulsory. Recommendations are sought from IDRA on how to do this. On receipt of recommendations from IDRA, we will accordingly request the concerned Ministries/Departments.
IDRA Chairman Mohammad Zainul Bari said, we have received the letter from the Ministry of Finance. We are working towards this goal. There is a law which has abolished third party insurance. It can't be turned back on suddenly at will. We want to develop an alternative product (insurance product).
Will the new product be named something other than a third party? When asked such a question, he said, we cannot say that right now. We are developing a product with our experts so that it is acceptable. It (third party insurance) has been cancelled, the ground on which the compensation is less, has to be addressed. We are working with those who are experts in the insurance sector. We want motor insurance to be compulsory. But not only with the law, it should also be seen to benefit the people. Then people will accept it themselves.
On the other hand, the insurance people say that there is no transportation anywhere in the world without insurance. Third party risk insurance is widely used in all countries. But suddenly third party risk insurance has been removed by changing the road transport law in our country. It is a suicidal decision. Third party insurance should be brought back in case of transport by whatever name. If necessary, the insurance premium and the amount of compensation should be increased.
Pioneer Insurance Chief Executive Officer (CEO) Syed Shahriar Ahsan said that third party risk insurance is prevalent all over the world. But suddenly third party risk insurance has been abolished in our country. It is a wrong decision. Insurance is a mechanism for compensation. As there has been a problem in terms of compensation due to withdrawal of insurance, on the other hand the government is losing revenue.
He said that insurance should be made compulsory in the case of transportation. In this case, the premium should be increased if necessary. The premium for third party risk insurance was increased to three times. Besides, the amount of compensation should also be increased. Earlier, 20 thousand taka was given as death compensation, now it can be increased to one lakh taka. At the same time, earlier there was a compensation system of up to 50 thousand taka for vehicle damage, which can also be increased to one lakh taka.
Bangladesh General Insurance Company (BGIC) CEO Ahmed Saifuddin Chowdhury made a similar recommendation. He said taking out third party risk insurance provides compensation for third party losses. In the case of third party risk insurance, the prevailing rules were that compensation of Tk 20,000 for accidental death and Tk 50,000 for vehicle damage. We think third party insurance should be reintroduced even if this compensation is increased. In this case, rules can be introduced for death and vehicle compensation of one lakh rupees.
Nowhere in the world can transport be carried without insurance. But in our country third party insurance has been suddenly removed. This is definitely a wrong decision. Now if transport insurance is made compulsory again, it will be a very good decision. On the one hand, there will be a system of compensation, on the other hand, the revenue of the government will increase.
Sheikh Kabir Hossain, president of Bangladesh Insurance Association (BI), an organization of insurance owners, told Jago News that giving up transport insurance was a wrong decision. We have already demanded to make transport insurance compulsory. Several inter-ministerial meetings have been held in this regard. Now I don't know what the ministry has decided. But nowhere in the world does transport operate without insurance. Our country's transport owners, workers are very strong. Third party insurance has been waived on their fuel. Now if they want to make transport insurance compulsory again, there may be obstacles from their side.
What is Third Party Risk Insurance?
Third party risk insurance is a type of insurance through which a third party is indemnified. If a vehicle covered by third party risk insurance meets with an accident, the driver of that vehicle will not receive the insurance claim. However, the passenger or pedestrian of that vehicle will get compensation if he dies due to the accident of that vehicle. No compensation if injured. Again, if a vehicle covered by third party risk insurance causes damage to another vehicle or property, the vehicle or property that has been damaged will be compensated. The death compensation under third party risk insurance in Bangladesh was Tk 20,000. And the maximum compensation for car or property was 50 thousand taka.