Motor (Third Party) insurance conundrum

 I read a report recently where the writer was accusing the insurance industry of unwholesome practices in respect of motor (Third Party) insurance. He said insurance practitioners do not educate the insuring public of the benefits of motor (Third Party) insurance. He said all we do is collect premium and keep quiet on the benefits.

The accusation did not make any sense to me; I went on line and found lots of literature on motor (Third Party) insurance in Nigeria. In addition, virtually all the websites of insurance companies in Nigeria have literature on motor (Third Party) insurance. At a personal level, I know I have written at least five published articles in various national newspapers on the topic. Beyond that, I advise clients and non-clients on the benefits of motor (Third Party) insurance at every given opportunity. The last time I did that was two Sundays ago to a group of 25 people.

Also, sometime ago, I got to an accident scene and stopped. In the usual Nigerian fashion, they were arguing about who was right and wrong when it was pretty obvious. I used the registration number of the vehicle I adjudged to be the negligent party and checked his insurance status. It was a valid motor (Third Party) insurance policy. I called him aside and told him the argument was unnecessary. I advised him to take photos of the accident scene and the damaged portions of the other vehicle. There was a police station about 150 meters away from the accident scene. I told him to contact the station and get a police report. Then he should notify the insurance company of the accident as soon as possible. When he gets the claims form, he should state exactly how the accident happened without admitting guilt. From the photos of the accident scene and his narrative, his insurer will know he is guilty.

He was wide-eyed when I told him that the insurance company will pay for the repair of the other vehicle. I had assessed the damage and knew it would not cost more than N300,000 to fix, so I did not even bother to tell him that he is entitled to a maximum of N1 million indemnity from the insurance company. I also informed him of the necessity to place his insurance business through a registered insurance broker subsequently to make life easier for him. I am aware that many other insurance brokers will do a similar thing in such a situation, so the accusation of unwholesome practices in motor (Third Party) insurance is surprising.

In fact, the vehicle of our subject matter here would also have been fixed by the insurance company if he had a newer variant of motor (Third Party) insurance called by some insurance companies as motor (Third Party) insurance + or extension. It is an extension of the statutory motor (Third Party) insurance. Usually, motor (Third Party) insurance, as we said previously on this column, is a benefit policy for third parties only. The policy holder enjoys no benefit apart from being relieved of legal liabilities to third parties for bodily injuries, death and property damage. But this variant extends limited cover to own damage. A particular insurance company has a limit of N250,000 for own damage in the event of an accident. To enjoy this benefit, however, the policy holder pays extra premium, for instance, N10,000 instead of the usual N5,000 for private vehicles and N12,000, instead of N7,500 for commercial vehicles. The vehicle of our subject matter is old model and N250,000 could just about fix it.

But Motor (Third Party) Insurance Plus is not suitable for luxury or new vehicles, which are expensive to repair. It is more suitable for vehicles under N2 million in value that are not likely to cost more than N250,000 to repair in the event of an accident that is not severe. But the policy holder must be aware of the risk he is carrying. In the event of total loss, he will have no remedy and in the event of an extensive damage to the vehicle, he will be his own insurer for any amount above N250,000 minus excess. Not all insurance companies have this product. You can contact a registered insurance broker to guide you on insurance companies that offer this product.

Let us use the rest of the article to revisit Motor (Third Party) Insurance. Motor (Third Party) Insurance is one of the six compulsory insurances in Nigeria. Motor (Third Party) Insurance is a benefit policy for third parties only. It protects the policy holder against legal liabilities to third parties arising from the use of his vehicle on the road.  The Motor Vehicles (Third Party) Insurance Act of 1945, which took effect from 1st April 1950, makes it an offence for anybody to use a motor vehicle on the road without having in place the minimum motor insurance (Third Party) to cover the motorist against liabilities arising from third party bodily injuries or death.

The Insurance Act of 2003 extended the cover to take care of liabilities arising from damage to third party property to the tune of one million naira. A policyholder can increase the limit of his property damage with payment of additional premium.

While the insurance industry is using a multi-faceted approach to create awareness about insurance, the insurance public should also take time to go through their insurance policies. It is a contract and nobody should sign contracts blindly. The insurance industry, however, has a remedy for those who are too busy to go through their insurance policies or find it difficult to understand them. Go through a registered insurance broker for guidance. His services to the insured are FREE.