23 August 2023 02:45 pm Views - 235
Per capita, Sri Lanka has one of the highest road accident rates in South Asia with 8 to 9 people killed due to road accidents per day, an average of 40,000 crashes annually resulting over 3,000 deaths and 8,000 to 9,000 serious injuries. According to Sri Lanka Police, in the first four months of 2023 alone, there were 667 road accidents in the country which led to the deaths of over 700 persons. The Ministry of Health reported that annual economic loss from road traffic crashes range from Rs.200 billion to Rs. 300 billion (2% to 3% of GDP). The lack of discipline of motorists and narrow roads contribute to most minor accidents, while speeding, particularly on long distance travel, results in many lives being tragically lost. It is evident that prevention and control measures have not been effective due to the uncoordinated nature of road safety programs and initiatives.
These nearly inevitable risks associated with vehicle ownership are what have made motor insurance a crucial safeguard for vehicle owners. Motor insurance was devised over a century ago in the developed world. In Sri Lanka, motor insurance has been legally mandated through the Motor Traffic Act, and third-party insurance cover is a minimum requirement under this act for all vehicles.
Third-party liability coverage is one of the most important aspects of motor insurance, as it covers bodily injury, death, or property damage caused to others by the insured vehicle. This protects pedestrians and other vulnerable road users in Sri Lanka by ensuring they receive compensation in case of accidents caused by insured vehicles. Victims of serious accidents benefit particularly, as motor insurance facilitates timely compensation and medical assistance to them, often saving lives.
There are broadly two classes of motor insurance –comprehensive insurance and third-party liability. Comprehensive motor insurance offers extensive coverage for the insured vehicle, including damages caused by accidents, theft, fire, and natural disasters, whereas the third party policy only provide coverage to third party bodily injuries and property damages.
Beyond these motor insurance classes, there are several types of motor insurance available in Sri Lanka, designed for privately owned cars, motorbikes, three-wheelers, commercial vehicles, agri-vehicles and public transportation.
Private Car Insurance is tailored for privately owned cars and offers coverage for accidental damages, theft, and other unforeseen incidents. Off-Road Vehicle Insurance protects four-wheel-drive vehicles used for off-road travel, covering damages and potential risks specific to such activities. Vintage and Classic Car Insurance is a specialized insurance which preserves the unique value and historical significance of vintage and classic cars.
Three-wheeler Insurance protects three-wheelers against accidents and liabilities while providing peace of mind for drivers and passengers. Motorcycle Insurance is designed specifically for motorcycles and offers coverage for damages to bikes and liabilities arising from accidents.
Commercial Vehicle Insurance is for vehicles used for commercial purposes, such as taxis, buses, trucks, and delivery vans. It covers both the vehicle and third-party liabilities. Designed for trucks and lorries transporting goods, Goods Carrying Vehicle Insurance covers damages to the vehicle and the transported goods.
Public Transport Insurance is geared towards public transport vehicles, including buses and minibuses, providing comprehensive coverage for both the vehicle and passengers. Agricultural Vehicle Insurance provides coverage for tractors and other agricultural vehicles used in farming activities.
As comprehensive motor insurance safeguards vehicle owners against potential financial losses arising from unforeseen incidents and compensation claims, it provides them peace of mind. This is in addition to the obvious benefit of covering the costs of damages to their vehicles in the event of accidents, theft, or natural disasters. Studies have also found that insured vehicle owners in Sri Lanka tend to drive more responsibly as motor insurance premiums are influenced by the policyholder's driving history.
Beyond vehicle owners and third-party victims, motor insurance benefits multiple industries. First, the insurance industry itself. Motor insurance helps the industry mitigate risk by spreading risk across a broad customer base, making it a sustainable and profitable segment. A reliable and effective motor insurance market also builds trust among the public and enhances the credibility of the industry. More broadly, motor insurance protects financial institutions that provide vehicle loans, safeguarding their assets in case of default or total loss of the financed vehicle.
It boosts the automotive industry and drives vehicle sales, as potential buyers feel more confident about purchasing vehicles with proper insurance coverage. The peripheral elements in the automotive industry, such as repair workshops and mechanics, also benefit. In the event of accidents, motor insurance helps with the swift resolution of claims, ensuring these small businesses receive payments in a timely manner. The automotive industry makes further gains through motor insurance – it enhances the resale value of vehicles in Sri Lanka as prospective buyers feel more secure purchasing a second-hand vehicle with existing insurance coverage.
From a national perspective, motor insurance benefits the economy of Sri Lanka. It relieves the government from the burden of compensating accident victims and settling third-party liabilities, and a well-regulated insurance sector is seen as an encouraging sign by foreign investors considering Sri Lanka as an investment destination.
All these factors highlight that the legal mandate is not the only reason to obtain and renew vehicle insurance. Motor insurance is an essential tool for vehicle owners around the country, for themselves and their passengers, as well as fellow motorists, pedestrians, industries and the economy as a whole.