Publication: Motor Third-Party Liability Insurance

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Gönülal, Serap
Motor Third Party Liability Insurance (MTPL) ensures that damage to third party health and property caused by an accident for which driver and/or owner of the car were responsible is covered. A policy may be taken out by the owner of a vehicle or by a lawful possessor authorized by the owner on behalf of the owner. Compulsory MTPL Insurance is a financial protection system built to prevent any grievance that third parties could face, due to lack of solvency of first party who caused bodily injury or property damage following any event related to a car accident. Motor insurance is generally measured non-life insurers' strongest class of business in terms of premium volume. In most markets, it is characterized by high competition and cyclical fluctuations in results. Non-life insurers' motor result is thus likely to have a particularly strong impact on the overall result. In most countries, MTPL insurance is compulsory in order to protect the public. World Bank studies in Africa, Central Asia, and Europe have shown that motor insurance premiums represent at least 30 percent of all non-life premium income. This phenomenon may be explained by the rapid rise of motor fleets. MTPL insurance has been introduced in the formerly centrally planned economies only in the past decade, but it is poorly understood. Motorists are inclined to view it as a form of tax that they are at liberty to evade, rather than as a protection against their personal liability a concept that is not familiar to the general public. Motor insurance has the potential to be a powerful tool in the promotion of personal responsibility. If communicated effectively, the link between the consequences of causing an accident and the economics of paying for those consequences will of itself gradually lead to improved driving.
Gönülal, Serap. 2010. Motor Third-Party Liability Insurance. Primer Series on Insurance;Issue 16. © World Bank, Washington, DC. License: CC BY 3.0 IGO.
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