Beyond Protection: How Motor Insurance boosts industries and the economy

Traffic congestion, capacity constraints and sweltering heat make travelling in public transport a stressful and draining experience in Sri Lanka. Vehicle ownership largely eases these difficulties and brings peace of mind to motorists. However, with the convenience of vehicle ownership comes an added level of responsibility for the safety of the passengers, fellow motorists, and pedestrians.

Per capita, Sri Lanka has one of the highest road accident rates in South Asia with 8 to 9 people killed due to road accidents per day, an average of 40,000 crashes annually resulting over 3,000 deaths and 8,000 to 9,000 serious injuries. According to Sri Lanka Police, in the first four months of 2023 alone, there were 667 road accidents in the country which led to the deaths of over 700 persons. The Ministry of Health reported that annual economic loss from road traffic crashes range from Rs.200 billion to Rs. 300 billion (2% to 3% of GDP). The lack of discipline of motorists and narrow roads contribute to most minor accidents, while speeding, particularly on long distance travel, results in many lives being tragically lost. It is evident that prevention and control measures have not been effective due to the uncoordinated nature of road safety programs and initiatives.

These nearly inevitable risks associated with vehicle ownership are what have made motor insurance a crucial safeguard for vehicle owners. Motor insurance was devised over a century ago in the developed world. In Sri Lanka, motor insurance has been legally mandated through the Motor Traffic Act, and third-party insurance cover is a minimum requirement under this act for all vehicles.

Third-party liability coverage is one of the most important aspects of motor insurance, as it covers bodily injury, death, or property damage caused to others by the insured vehicle. This protects pedestrians and other vulnerable road users in Sri Lanka by ensuring they receive compensation in case of accidents caused by insured vehicles. Victims of serious accidents benefit particularly, as motor insurance facilitates timely compensation and medical assistance to them, often saving lives.

There are broadly two classes of motor insurance –comprehensive insurance and third-party liability. Comprehensive motor insurance offers extensive coverage for the insured vehicle, including damages caused by accidents, theft, fire, and natural disasters, whereas the third party policy only provide coverage to third party bodily injuries and property damages.

Beyond these motor insurance classes, there are several types of motor insurance available in Sri Lanka, designed for privately owned cars, motorbikes, three-wheelers, commercial vehicles, agri-vehicles and public transportation.

Private Car Insurance is tailored for privately owned cars and offers coverage for accidental damages, theft, and other unforeseen incidents. Off-Road Vehicle Insurance protects four-wheel-drive vehicles used for off-road travel, covering damages and potential risks specific to such activities. Vintage and Classic Car Insurance is a specialized insurance which preserves the unique value and historical significance of vintage and classic cars.

Three-wheeler Insurance protects three-wheelers against accidents and liabilities while providing peace of mind for drivers and passengers. Motorcycle Insurance is designed specifically for motorcycles and offers coverage for damages to bikes and liabilities arising from accidents.