OF THE REPEALED MOTOR VEHICLES ACT 1939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
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
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.
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”.
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.
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
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).
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).
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