The Insurance Development and Regulatory Authority (IDRA) has directed non-life insurance companies of the country to introduce new insurance schemes to cover financial loss due to motor vehicle accidents.
The regulator gave the direction at the 157th meeting of IDRA recently.
According to sources, about 60 lakh registered motor vehicles including motorcycles are operated on private and commercial basis in Bangladesh. In this regard, the insurance companies have been instructed to prepare new insurance plans by addressing different risks and send them to all the non-life insurance companies of the country along with the authorities concerned.
There are currently 46 non-life insurance companies in the country.
“Insurance sector penetration in the gross domestic revenue (GDP) will increase if new insurance schemes to reduce the financial loss due to motor vehicle accidents are launched and marketed,” IDRA Director (Monitoring of Registration and Management Costs) Jahangir Alam told The Business Post.
According to insurance officials, there are three types of risks in the case of motor vehicle movement on the road - damage to life and property of innocent pedestrians or third parties by the vehicle, damage to life and property of the vehicle's driver or passenger, and damage to the vehicle itself.
Up till 2021, two types of insurance were prevalent in the motor insurance category in Bangladesh.
The first is third party insurance to cover third party risk, which is mandatory in Bangladesh like other countries of the world. The other is the comprehensive insurance plan, under which the vehicle's damage along with third party damage to property is covered.
After the enactment of the Road Transport Act 2018, the IDRA, in a circular in December 2021, instructed insurance companies to scrap the third-party insurance policy as it 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.
An IDRA official, seeking anonymity, said, “The third-party insurance is mandatory in almost all countries around the world, and it is important to make it compulsory in Bangladesh as well. Because the existing insurance policies do not compensate for the injury or death of a pedestrian in an accident, which is really sad.”
“The IDRA is working on how to re-introduce and make the third-party insurance mandatory with new services.’’ the official added.