Missing catalyst in 3rd party motor insurance, says expert

By Olivia Nnorom

• Enlightenment

Third party motor insurance, also referred to as  “liability-only” or “act-only” policy insurance, is a statutory requirement for all vehicle owners. The insurance of motor vehicles against the risk of liability for injury to, or death of third parties caused by the driver’s negligence was made compulsory by the Motor Vehicles (Third Party Insurance) Act 1945, which came into force in 1950.

The third party in this case, include pedestrians, other vehicles, occupiers of these vehicles and properties owned by third parties on the road at any point in time.

Although there is a variant of third party motor  insurance, known as “enhanced third party”, where customers pay more for premium so that the policy can be extended to cover own damage to certain limits, third party motor policy provides relief for third parties only and does not cover personal damage or provide personal relief for the policyholder.

However, it is considered a relevant policy because it enables the policyholder to transfer the unlimited liabilities for third party bodily injuries and death and limited third party property damage liabilities to an underwriter, for a minimum fee known as premium.

In spite of the immense benefits, it is estimated that only two out of eight vehicles on Nigerian roads have genuine third party motor insurance. Reports also show that members of the insuring public and third party road users have not fully realised the importance of the insurance in Nigeria, bringing to fore the notion that the lack of awareness, as well as price points, are one of the reasons people are not buying third party motor insurance.

Consequently, experts in the industry have and are creating opportunities for addressing these issues, especially the lack of effective awareness and its obvious consequences.

Temitope Adeyemi, founder and chief executive officer of Pay-U, an insurTech platform providing affordable motor insurance for the underserved market, said in a webinar titled, “Vehicles’ Roadworthiness and Third Party Motor Insurance”, that his company made innovations around price point, as well as education.

According to him, the first step to an effective education involves troubleshooting and having a clear understanding of how customers view third party motor insurance coverage. He observed that from his years of experience as a sales rep that if a customer did not have claims the previous year, they are most often not motivated to subscribe the following year.

To tackle the issues of price point, he said Pay-U built a mobile app (pay per minute auto insurance), a solution that helps customers buy motor insurance for as low as 70 kobo per minute.

Adeyemi also advised the third motor insuring public to make enquiries before deciding to register with any insurer, and also  endeavour to work with responsible, licensed insurance companies.

He noted that many people don’t do third party insurance because most insurers do not issue policy documents, which is the official contract with the insurance company.

“An important feature of a third party insurance is that only a licensed motor insurer has the ability to issue a valid third party motor insurance certificate,” he said.

In the event of an accident likely going to lead to a claim, Adeyemi said the victim’s first move should be to validate offenders insurance cover, following which the policyholder, through his broker or in person, notifies the underwriter as soon as possible. The underwriter then  fulfils the responsibility to assess the situation, takes record of the third party involved in the accident and  accepts liability for the loss, based on the account of the accident by the policyholder.

He explained further that the third party is then required to make an estimate. The insurance company will either choose to fix the car or in an occasion where the third party wants to use his mechanic, the company will send an engineer to ensure the cost is what it ought to be.

“Whichever way, there is an agreement between the third party and the company. In some cases they can replace the car,” Adeyemi said.

Stating the consequences of not having a third motor insurance, Adeyemi said: “If as an active driver, you do not own a valid third motor insurance coverage, you risk paying a fine of N250, 000 or a one year jail term or both. And even in situations where one can avoid facing these penalties, it is okay to know that you are not on the road to avoid being caught, rather you are on the road to protect the other people and yourself on the road.”

Adeyemi, therefore, encouraged the insuring public to access and  take advantage of the third party motor insurance to make driving a less problematic issue in the country.