The Securities & Exchange Commission of Pakistan (SECP) recently disclosed a concerning statistic that only 2.77 percent of the total 3 crore registered vehicles in Pakistan are insured. This figure places Pakistan significantly behind other countries like India, Saudi Arabia, Bangladesh, Sri Lanka, and Uganda in terms of insured vehicles.
The report by SECP titled “Status of Third Party Motor Insurance in Pakistan” indicates that out of the 3 crore registered vehicles, 2.3 crore are motorcycles, and 70 lakh are motor cars. However, only 12,557 vehicles have motor third-party (MTP) insurance, and 9 lakh have comprehensive motor insurance.
The primary reasons behind the low motor insurance penetration in Pakistan are multifaceted. Firstly, unlike many other countries, motor insurance is not mandatory in Pakistan. In countries with high motor insurance penetration, legal requirements make it necessary to operate and register a vehicle with valid insurance.
Secondly, there is a lack of awareness among the general public regarding the importance and benefits of having motor insurance, and concerns about affordability and the complexity of insurance processes also contribute to low uptake.
One of the significant challenges in implementing compulsory insurance requirements in Pakistan is the presence of a large number of unregistered and unlicensed vehicles that often operate without any form of insurance.
Moreover, the class factor in road accidents creates difficulties in establishing legal liability against offenders, hindering the pursuit of insurance claims by affected parties.
To increase motor insurance penetration, a multi-faceted approach is needed. Raising awareness about the advantages and legal obligations of motor insurance through comprehensive campaigns is essential. Streamlining insurance procedures and providing affordable options can also encourage uptake.
Collaborating with governmental bodies to enforce compulsory insurance regulations and partnering with financial institutions and the automotive industry can be effective strategies to boost motor insurance.