Govt seeks proposal from IDRA to restore third party insurance

The finance ministry has sought a proposal from the Insurance Development Regulatory Authority (IDRA) to restore motor vehicle insurance, also known as third party insurance, as it wants to make it mandatory by amending the Road Transport Act 2018.

The Finance Division under the ministry recently sent a letter, signed by its Deputy Secretary Md Jahid Hossain, to the IDRA chairman seeking the proposal amid the demand for resuming third party insurance.

After the enactment of the Road Transport Act 2018, the IDRA in a circular in December 2021 instructed insurance companies to scrap third party insurance.

The instruction was given as the policy did not cover the third party or the vehicle involved in the accident or property damage.

The IDRA later took an initiative to restore the policy by increasing the compensation for accidents. A five-member technical committee headed by IDRA’s former executive director SM Shakil Akhter was formed in this regard, but the policy was not restored finally.

At that time, the committee proposed an increase in compensation – Tk 5 lakh for accident deaths, Tk 3 lakh for serious injuries, Tk 1 lakh for slight injuries, and Tk 2 lakh for victims’ property damage.

In the abolished policy, the compensation for a dead victim was Tk 20,000 and that for an injured one was Tk 5,000-10,000.

Third party insurance compensates a person injured or killed in a road accident. It also covers any damage done to any property or vehicle involved in the accident.

An IDRA high official told The Business Post third party insurance is mandatory in almost all countries and it is important to make it so in Bangladesh as well.

This is because the existing insurance policies unfortunately do not compensate for the injury or death of a pedestrian in an accident, he said.

Stakeholders said scrapping third party insurance is depriving pedestrians of accident compensations. They said this insurance is compulsory, but not comprehensive, all over the world.

It is not logical to make comprehensive motor vehicle insurance compulsory for all considering people’s financial capabilities, they noted.

India has such a policy and it was unreasonable to abolish it in Bangladesh, they added.

AKM Ehsanul Haque, a director of Sadharan Bima Corporation, said the third party in an accident faces serious risks as they are not covered by any insurance.

“Who will take responsibility if a pedestrian unexpectedly dies in a road accident?” he said.

He also said insurance companies had not paid compensations under the abolished policy but still it was not logical to do away with it without making alternative arrangements.

“The policy should be re-launched and made compulsory,” Bangladesh Insurance Association President Sheikh Kabir Hossain said, adding how that would be done is important.

The abolished policy offered no benefits to the insured and that is why some advantages should be offered if it is re-launched, he said.

The IDRA could also consider renaming the policy, he added.

Bangladesh Jatri Kalyan Samity Secretary General Mozammel Haque Chowdhury said the amount of damage caused to a third party in a car accident is close to 1 per cent of the country’s gross domestic product or over Tk 12,000 crore.

As the third party is deprived of such a large amount of compensation, it is the responsibility of the state to address this, he said.

But as the state does not have a fund to compensate these victims, insurance companies should pay this money like the neighbouring countries, he said.

“We thought the new road transport law would ensure this compensation. But we saw that policymakers had misled the government and got third party insurance abolished, depriving the third party of compensation,” Mozammel explained.

“I think the policy needs to be re-launched, and the third party should be given legal protection,” he added.