The sustenance of the popular on-the-spot insurance product is in the balance with the strict implementation this month of amendments to the Motor Traffic Act by Police.
Motorists and insurance companies are compelled to report every accident to the Police although companies say it won’t affect the on-the-spot payment process.
A senior official of the Ministry of Transport told the Sunday Times FT that the amendments, passed in Parliament in October last year and made effective from July 1 2009, makes it compulsory for motorists and insurers to inform the nearest police station of an accident. He said that failure to do so will be liable to a fine not less than Rs. 3,000 and not exceeding Rs.5,000 for motorists and a fine ranging from Rs. 5,000 to Rs. 10,000 for insurers. This is the first time insurers have been ordered to also report accidents involving clients to the Police, the official said.
Earlier too the law had provision for motorists to report accidents but it was not implemented fully after products promoting on-the-spot insurance payments became popular. The latest move would increase the workload at police stations and more cases will now be filed in courts, apart from minor accidents which are settled amicably by both sides with Police intervention.
The official said reporting an accident would help to tackle issues like damage valuation, fraudulent claims or under estimation (for motorists) which often arise when claims are paid on the spot.
The Insurance Board of Sri Lanka has also directed insurance companies to ensure their advertisements doesn’t specify anything to the contrary or anything that would result in non-compliance with the statutory requirement under Section 161 of the Motor Traffic Act which requires that any accident due to the use of any motor vehicle on a highway is reported forthwith to the nearest police station.
A senior Police officer attached to City Traffic said that a proper legal procedure including the issuing of police reports would be followed now. He noted that insurance companies were involved in settling minor accidents without informing the Police under the on-the-spot system, which cannot be done now. Even minor accidents must follow the process and that the insurer should intervene only on completion of the legal procedure.
Director (General Insurance) of Eagle Insurance PLC, Ainsly Alles told the Sunday Times FT that his company has already devised a format to provide details of accidents of their clients to the police through a dedicated telephone line and this will help them to cooperate with law enforcement authorities. On the other hand, he said, that it is essential for motorists to follow proper guidelines when a traffic accident occurs.
A senior official of Union Assurance said that the number of motor traffic accidents is increasing day by day as the country’s vehicle fleet is around 3.2 million at present and most motorists are unaware of motor traffic laws. He added that his company handles a large number of claims per day and the majority of them are minor accidents. He said that they have devised a system of sending a monthly detailed report of accidents of their clients to avoid any inconvenience for them when settling their claims. Motor insurance schemes of Eagle Insurance and Union Assurance offer easy settlement of claims without resorting to on the spot payments.
A senior manager of Ceylinco VIP ‘On The Spot’ told The Sunday Times FT that they have expertise and qualified motor mechanical engineers to assess the damage caused to a vehicle in a road accident to settle claims on the spot.
On the other hand, Ceylinco Insurance Company will consider the payment of any additional claims for the damage caused to a vehicle in a road accident if the customer provides a bill for the total cost for repairs from a garage after thorough inspection by their officers. He added that the company investigates fraudulent charges and such claims are not settled on the spot.
The motor car insurance premium of his company, the official said, is around Rs 6 billion per annum and the claim ratio is around 60 %. Ceylinco Insurance settles an average of 585 motor claims everyday where all claims are inspected on the spot and settled accordingly.
He said the new amendments will not affect their business as this will give their officers an opportunity to make inspections as the motorists cannot move the vehicle without police permission. If it is a trivial accident and the parties involved settle amicably, so that they can remove the vehicles from the scene to avoid disrupting traffic, reporting the accident should follow thereafter.
Industry sources said however that the motor insurance industry faces a common problem of getting accident reports from the police quickly resulting in a delay in processing claims.
A senior manager at Janashakthi Insurance Co Ltd says they would use latest technology such as digital cameras and IT to assess the damage on the spot. He said that they don’t give cash on the spot due to the risks to the policy holder and to avoid irregularities.