Third Party Insurance: Do you know your rights?

Nov 06, 2009

OVER 900 boda bodas were impounded in September during a crackdown in Kampala on motorcycles that did not have, among others, Motor Third Party Insurance. Many victims of accidents as well as motorists do not know the use of Third Party Insurance.

By Ben Okiror
 
OVER 900 boda bodas were impounded in September during a crackdown in Kampala on motorcycles that did not have, among others, Motor Third Party Insurance. The Kampala Metropolitan region deputy spokesperson, Henry Kalulu, said sh7.24m had been collected from express penalty tickets issued by the Kampala Police from impounded motorcycles.

And the acting commissioner traffic and road safety, Bazil Mugisha, said a countrywide crackdown on vehicles was in the offing. One of the items that can land you in trouble with the law is lack of Motor Third Party Insurance.

However, according to a head to head survey, many of the victims and other Ugandan motorists do not know the use of Third Party Insurance. They think it is a tax you have to pay every year if you have a vehicle. And when they get involved in motor accidents, they either try to negotiate with the victim and compensate them or they are compelled by Police to pay the victim before they can release their vehicles from custody.

Few people know that the Motor Third party Insurance you bought is supposed to help you during such misfortunes. Your insurance company is supposed to cover some of the costs incurred as a result of the accident.

The problem

Road transport is the dominant mode of transport in Uganda, carrying over 90% of passengers and freight traffic.

The vehicle population in Uganda is about 450,000.
And according to the World Health Organisation, Uganda ranks second in road fatality rates after Ethiopia. Police statistics also confirm that Uganda has the highest number of road accident casualties in the Great Lakes region, which includes Rwanda, Burundi, Congo, Tanzania and Kenya.

A report presented to Parliament early this year suggests that road accidents rose to 19,528 in 2006 from 5,674 in 1990. The finance ministry estimates that over sh333b is lost annually as a result of accidents, namely cost of vehicles, medical bills and loss of income and property, among others.

Records at Mulago Hospital casualty ward show that there are about 85 road accident victims every week. Many of the patients that we talked to, did not know there could be compensated.

A report by Uganda Insurance Commission confirms that few people are making claims against their third party insurance. According to David Tumuhaise, the technical manager at Uganda Insurers Association (UIA), between January and December 2008, 263,753 vehicles bought the policy, totalling to sh5.9b in insurance revenue.
Insurance companies are just pocketing most of this ‘free money’.

An annual report issued by the UIA recently revealed that of the sh167b growth by licensed insurance companies in 2008, 91% of the total premium was non-life insurance and mainly from the mandatory Motor third party insurance policy.

However, this is undermining the relevance of the Third Party Insurance requirement for vehicles because Ugandans are not reaping any benefit from the policy. It is paid because it is mandatory but many feel the law on third party insurance has totally failed to achieve the target it was set for.

What is third party insurance?

Third Party Insurance policy was established by the Motor vehicle Insurance (Third Party Risks) Act of 1989. The Act requires that in the event of an accident, the vehicle or motorcycle involved (first party), the occupants of the vehicle (second party) and the other vehicle, person or property involved (third party) be compensated by the insurance company.

The third party is entitled to compensation by an insurance company in case of an accident causing bodily injury or death of persons on public roads. The first party is responsible for its own damages or losses whether caused by itself or the third party.

Depending on motor type, capacity, usage, geographical limit, value, driver’s history and market condition, third party insurance policy might cost between sh22,000 and h550,000 for cars and sh3,300 and sh13,000 for motorcycles for either four or 12 months.

Government cars do not buy third party because Government provides a fund to cater for losses and damages caused by its vehicles. If a Government vehicle knocks you, you secure compensation through the Attorney General, who will process the necessary compensation.

Experience

David Mwebesa, a taxi owner says when the Police tow your vehicle to the station after an accident, they refuse to release it until you pay the victim.

“They do not even advise us who do not know that the third party can bail us out. Why don’t they tell us these things?”

Fredrick Womakuyu says he sympathised with the driver who knocked him because he looked unable to compensate him. “He only drove me to hospital. I forgave him and everything stopped there.
“I did not know that his insurance company could have compensated me,” Womakuyu said.

Inspector Jessica Kabasindi, the in-charge of accidents investigation at Central Police Station Kampala, says if it is a minor accident and the two parties agree to settle the issue on the site, Police does not pursue the case.

“But for some accidents we still have to prosecute drivers or owners of the vehicles. Whether the third party insurance exists or not and can pay, we may have to prosecute the driver in court for careless driving,” she said
She explains that it does not mean that the Police does not know how third party insurance works.
“We train all traffic policemen about third party insurance in addition to how to handle road accidents in general.”

The claiming battle

Richard Obasoni knew the use of Third party Insurance. He submitted everything to his insurer, (name withheld) and was told investigations had to be carried out first.

“Whenever I would go back, they would tell me to return - over and over again, until I gave up,” he said.

Simon Esogu, a claims officer in one of the insurance companies, says before anyone can access payment for third party compensation, the owner of the vehicle must produce a police report, copies of log book and driver’s permit as well as invoices or receipts to substantiate amounts claimed, among others.

“In most cases, clients fail to submit these documents, give up and lose out. But we need the documents because we have to establish if the accident is genuine,” Esogu said.
  
Importance of the Third Party insurance policy

The acting commissioner for insurance, Evelyn Nkalubo-Muwemba, says motor third party insurance should provide security to the owner of a motor vehicle because in the event of an accident, the victims are compensated by the insurers.

She said: “By paying that money for third party per year, you transfer the risk of accident compensation to your insurance company, which is supposed to take on the risk when it occurs.

“When you cause an accident, the insurer is supposed to cater for the medical bills of the affected person up to sh1m or pay the members of the victim a maximum of sh1m in the case of death.”

Who may not claim compensation?

Tumuhaise says the intended beneficiaries of this policy (called third parties) must not be in a formal relationship with the insured and insurer. Therefore, members of one’s immediate family and employees of a company cannot claim for compensation in case they are involved in an accident with the family or company vehicle.

This, Tumuhaise says, is because family members have a personal accident insurance policy while employees have the workers compensation policy.

Since Third Party is primarily for the car and not the owner, if ownership changes, the accident victim will still be compensated by the insurer of the first owner as long as the certificate is still valid, says Tumuhaise.

What should you do after an accident?

Social compassion demands that you assist the victim to reach hospital if this is required. Report the accident to the Police and then ask your motor third party insurers to assist the victim. According to the Insurance Act, the victim cannot demand compensation from your insurance because the insurance has a contract with you not the victim.

“All third party claims in respect of damages to property, death or bodily injury, the third party shall proceed against the owner of the car, or the driver and not the insurer” the Act says.
Nkalubo also advises the accident victim not to claim from an insurance firm but from the insured as provided for in section 39 of the Motor Vehicle Insurance Act of 1989.

In payment of claims, the insurer compensates the affected individual with a sum of money equivalent to the value of property destroyed bearing in mind the excess that is always borne by the insured.

What if an insurance company fails to compensate the accident victim?

Obasoni and others like him may be frustrated by some insurance companies which play delaying tactics or use technicalities to avoid paying compensation to victims. But there is a solution.

You can lodge your complaint to UIA which has a disciplinary committee that deals with errant members. The Insurance Commission also has a Complaints Bureau, as provided by the Act, where you can send your complaint. Nkalubo says in the last five years, the bureau received, on average, 23 complaints per year about delays in settling claims.

She adds that the Commission carries out periodic on-site inspections of insurance players in order to ensure that policyholders’ interests are protected and that legitimate claims are settled timely. Those that default risk being disciplined.

“An insurance company that defaults on its obligations may be punished by way of fines or revocation of licence, depending on the gravity of the offence,” Nkalubo said.

What you need to claim third party
Before processing a Motor Third Party insurance claim, there are documents you need to get.
  • A Police Abstract Report to prove that an accident actually occurred and the claimant was the real victim of the accident.

  • A Death Certificate in case the accident victim dies. The certificate bears the cause of the accident.

  • A letter from the Chairman of the Local Council and letters of administration. These serve to introduce the victim especially when he has no recognised identification. Letters of administration serve the purpose of ensuring that the administrator of the estate of the deceased is the person supposed to be paid.

  • In the case of non-fatal accidents, a medical report and medical bills may be required to ascertain the medical expenses incurred by the victim.

  • Insurance certificate as proof that the insured entered into a contract with the insurance company

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