In an exciting collaboration between Minet Malawi, Britam, and The Daily Times - Malawi's leading newspaper - we are thrilled to introduce a groundbreaking initiative that will redefine your Wednesdays. Welcome to the Insurance Insights Column – a weekly rendezvous with the world of insurance and contemporary issues that matter. Every article aims to illuminate the intricate landscape of insurance products and relevant topics that impact us all. The articles are educative at all levels, catering to both practitioners and non-practitioners.
As published in The Daily Times (Malawi) on November 6th, 2024
Motor vehicle insurance accounts for a major share of premium income of most insurance industries in both developed and developing economies. In Malawi, motor vehicle insurance accounts for circa 60 per cent of insurance business.
Motor vehicle insurance differs from other forms of insurance due to the legal requirement to insure. The only insurance form that comes close to motor vehicle insurance is workers compensation cover, which also bears a legal force. The insurable interest of a motorist as user of motor vehicle is a legal obligation.
Motor vehicle insurance is required not only to cover financial liabilities that may arise from accidents injuring third parties, but also includes an interest in the vehicle itself against loss or damage. If there was no motor vehicle insurance, motorists would have to pay exorbitant sums of money to other parties towards cost of repairs of the other party’s vehicle besides huge amount spent on own vehicle. The expenses may further shoot up if an accident involves hospitalization of a third party or death was involved.
As alluded to earlier, motor vehicle insurance is compulsory under laws of Malawi. The Road Traffic Act of Malawi states that anyone who uses a motor vehicle on a road to which the public has access should have in place at least a third-party insurance in respect of use of the vehicle. Stated differently, the Road Traffic Act was enacted with a view of safeguarding financial interests of persons who get injured or killed or suffer property damage or loss of use of property due to negligence of motorists or other risks associated with use of motor vehicles. The law requires that a motorist should insure against risks of liability to third parties. Although motor insurance caters for third party liabilities and damage to the vehicle itself, it is important to understand that it is insurance of third-party liability arising out of use of a vehicle on public roads that is compulsory. Insurance for the vehicle itself, popularly referred to as ‘own damage’ by insurance people, is not compulsory.
Motor insurance policies vary from one insurer to another and also from one type of risk group to another. As a matter of fact, there are about four main motor vehicle insurance groups. The groups include, private motor car, commercial motor vehicle, motor cycle and motor traders. The difference between private motor car insurance and commercial motor vehicle insurance lies in construction of the insured vehicle and not on use. For example. a salon used as taxis, carrying passengers for hire and reward cannot be construed as a commercial vehicle, but private car. A minibus or a lorry used by a family somewhere in Nyambadwe in Blantyre, Chiputula in Mzuzu, or Area 47 in Lilongwe for domestic use (home errands) will be insured as commercial vehicle and not private car.
Despite the aforesaid variations, motor vehicle insurance policies may either fall under act liability or third party or third-party fire and theft or fire and theft or comprehensive cover. Whereas private car, commercial vehicle, motor cycles and motor traders denote type of insurance policy - wording, comprehensive, third party and others denote type of cover - scope of coverage.
The Act policy aims at complying with requirements of RTA. The policy covers Act risks only. Act risks include third party death and property damage. As per provisions of the Act, all vehicles moving on the roads of Malawi must possess insurance. The minimum cover available is Act. As mentioned earlier, Act policy covers only third-party liability risks. Third parties constitute pedestrians, passengers and any person, who has nothing to do with use of one’s vehicle on a public road. Liabilities towards damage to other people’s property are also covered. Act insurance policy is not popular among motorists in Malawi, due to its low limits of cover. Talk to us. We are here to guide and serve you.
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