The Sri Lanka Insurance Institute

Motor insurance and it's

application
Presenter - Ravi Sumithraarachchi

1
We will look at....
• Development of motor vehicle
• Business, regulatory and legal environment of motor insurance
underwriting.
• Type of motor policies, covers and it’s variants
• Standard exclusions
• Policy conditions
• Extensions & clauses

2
Developments in Motor Vehicles
• Developments for motor vehicles started during the Industrial revolution in
the latter part of 18th century.
• In 1896 first motor car was developed in Germany. It had 3 wheels and
powered by a little gasoline engine.
• At the beginning of 19th century (1901) first modern car took to the roads in
Germany.
• At the same time in UK & USA development of motorcycles started.
• World motor car boomed in 1905/1906 – first mass production started.
• 15 million of famous Henry Ford’s Model “T” cars were produced and last
one rolled off the line in 1927.
• Consequently motoring became a world-wide pursuit.

3
History - various developments in Sri Lankan
insurance market

4
Industry highlights Source-IBSL reports

• Out of twenty-seven (27) Insurance Companies (Insurers) in

operation as at 30th September 2023, fourteen (14)
companies are engaged in Long-Term (Life) Insurance
Business, twelve (12) companies are engaged in General
Insurance Business and two (02) companies function as
composite companies (dealing in both Long Term and
General Insurance Businesses).

• Seventy-Eight (78) Insurance Brokering Companies, were in

operation as at 30th September 2023. Total Assets of
insurance brokering companies have increased to Rs. 12,378
million as at the end of 3rd Quarter of 2023 when compared
to Rs. 9,202 million recorded as at 3rd Quarter of 2022,
indicating a growth of 34.51%.
Performance of the Insurance Industry[3rd quarter 2023 and
from year 2018 to 2022] Source-IBSL reports
The Gross Written Premium (GWP) growth of the insurance
industry was 7.70% during the 3rd Quarter of 2023, recording
an increase of Rs. 14,734 million when compared to the same
period in the year 2022. The GWP for Long Term Insurance
and General Insurance Businesses was Rs. 206,091 million
compared to the 3rd Quarter of 2022 amounting to Rs.
191,357 million.
As depicted in chart 1 a, the GWP of Long-Term Insurance
Business amounted to Rs. 109,931 million (Q3, 2022 Rs.
98,308 million) recording a growth of 11.82%. The GWP of
General Insurance Business amounted to Rs. 96,160 million
(Q3, 2022: Rs. 93,049 million) recording a growth of 3.34%.
 Sri Lankan regulation
• Regulation of the insurance industry is governed by the
Regulation of Insurance Industry Act, No. 43 of 2000.
• Prior to the enforcement of this Act, the insurance industry
was regulated by the Controller of Insurance acting under
the powers vested by the Controller of Insurance Act, No.
25 of 1962.
Sri Lankan insurance-regulations a back drop

• 1964 non-life insurance sector nationalized

• 1986 market was re-opened to private insurers.
• There are no tariffs at present on any class of general
insurance business.
• Tariffs which existed for motor insurance, fire
insurance and workmen’s compensation insurance
(WCI) were de-tariffed with effect from 1 January
2002, 2005 and 2007 respectively.
Business, regulatory and legal environment of
underwriting
• Marine, Life & Fire insurance are governed by English
Law.
• All other insurance is governed by Roman Dutch Law-only
2 countries in the World have R & D Law ( i.e South Africa
& Sri Lanka)
• Motor accident claims are covered by Statute Law (MTA)
and principles by Common Law (R & D)
• Regulation of Insurance Industry Act # 43 of 2000
• Motor Traffic (Amendment) Act # 8 of 2009
• Consumer Affairs Authority Act # 9 of 2003
• Law Reform (contributory negligence & joint
wrongdoers) Act # 12 of 1968.
• Electronic Transactions Act # 19 of 2006
• Insurance Ombudsman Scheme -2005
• Every person who wishes to use a motor vehicle on the road or
where people have access is required by law to obtain minimum
Third Party motor insurance.
• The protection of and assistance for those who are the innocent
victims of negligent drivers and the need to ensure that a
policyholder who has arranged insurance cover will be
guaranteed the appropriate protection are the fundamental
requirements for the legislation.
• The Motor Traffic Act, No.14 of 1951 and its subsequent
amendments consolidate the laws relating to motor vehicles and
their use on highways including provisions relating to insurance
against 3rd party risks.
 Motor Traffic Act
• Motor Traffic Act # 14 of 1951
• Motor Traffic (Amendment) Act # 3 of 1966
• Motor Traffic (Amendment) Act # 20 & 47 of 1968
• Motor Traffic (Amendment) Act # 22 of 1973
• Motor Traffic (Amendment) Act # 12 of 1975
• Motor Traffic (Special provisions) Act # 60 of 1979
• Motor Traffic (Amendment) Act # 21 of 1981
• Motor Traffic (Amendment) Act # 40 of 1984
• Motor Traffic (Amendment) Act # 5 of 1998
• Motor Traffic (Amendment) Act # 8 of 2009
• Part 1 – Registration of motor vehicles
• Part 2 – Construction & equipment of motor vehicle
• Part 3 – Revenue Licenses
• Part 4 & 5 – Passenger carrying permits
• Part 6 – Insurance against 3rd party risks.
• Part 7 – Driving Licenses
• Part 8 – Speed Limits & rules of the road
• Part 9 – Inspection & Testing of motor vehicles
• No person is permitted to use a Motor Vehicle on a highway without a
liability cover for death or bodily injury to 3rd parties – Section 99

• Vehicles belonging to the State or Local authorities are exempted if

such vehicles are used for specified purpose- Section 99(2)
 Motor Traffic Act

• Authorized Insurer
• Requirements as to Policies of Insurance and
Certificate of Insurance
• Passenger Liability Insurance for Motor Coach
• Production of Certificate of Insurance to Police
Officer
• All motor policies provide the required compulsory cover
and a certificate of insurance issued is in accordance with
the provisions of sections 100 & 102 of the MTA.

• The certificate specifies in addition to the registration # of

the vehicle, name/address of the policyholder, period of
Insurance etc, the persons who are entitled to drive and the
purpose for which the vehicle can not be used.
• Certificate # - usually the same as the policy #.
• Details of the vehicle covered.
• Name of the policyholder.
• Effective and expiry dates.
• Persons or classes of persons entitled to drive.
• Limitations as to use.
• Whenever policy is terminated or suspended by any
means before it’s expiry, the insured person shall
within 7 days after such termination deliver to the
insurer by whom the policy was issued the latest
certificate of insurance. If it’s lost or destroyed, make
and deliver to the insurer an affidavit o that effect.
(section 117)
• Whenever a policy of insurance cancelled or
suspended, the insurer shall within 7 days notify
such cancellation to the commissioner or such other
authority. (section 118)
What is Motor Insurance
• Auto insurance policy is a contract between you and an insurance
company.
• You pay a premium, and in exchange, the insurance company
promises to pay for specific car related financial losses during the
agreed period of the insurance policy.
 Motor vehicle means
• (a) any mechanically and/or electrically, and/or solar energy
propelled vehicle or vehicle propelled by liquid petroleum
gas or vehicle propelled by alternative fuel including a
tractor or trailer which is intended or adapted for use on
roads but does not include a road-roller.
• (b) any mechanically and/or electrically and/or solar energy
propelled vehicle, or vehicle propelled by liquid petroleum
gas or vehicle propelled for alternative fuel or intended for
use on land in connection with an agricultural or
constructional purpose such as leveling dredging,
earthmoving, forestry or any similar operation but does not
include a road roller.
Types of car insurance policies. How many???
 Types of motor insurance covers
Types of motor 3rd party injury 3rd party Loss/damage to Loss/damage to
policies & death property vehicle by Fire vehicle due to
damage and Theft an accident

Act Insurance
√ × × ×

3rd Party cover

√ √ × ×

3rd Party Fire &

Theft
√ √ √ ×

Comprehensive
Cover
√ √ √ √
 The ‘Act Only’ Motor Insurance Policy

• It provides the minimum cover required by the law, thus giving

rise to the name. In terms of Sections 99 and 100 of the Motor
Traffic Act, the drivers of motor vehicles are required to have a
motor insurance in place in order to ensure that drivers can
meet their legal liabilities in terms of the Act if they cause
bodily injury or death to a third party.
• They are seldom issued by the insurance companies as
protection is very limited.
• The limit of cover is unlimited for third party bodily injury or
death.
 ‘Third Party Only’ Motor Insurance Policy
Besides providing insurance cover against death or bodily injury
to third parties, it also provides protection against other legal
liabilities such as damages to property of a third party or third
parties.

In addition to unlimited third party bodily injury or death cover,

some policies offer unlimited third party property damage cover
for private cars and a limited form of cover for commercial
vehicles and motor cycles (usually Rs.15,000).

You need to check the third party property damage cover for
private cars as some insurers do not provide unlimited cover but
for say, Rs.5 million or Rs.10 million.
‘Third Party, Fire and theft’ Motor Insurance Policy

Under this cover, a policyholder may opt to include

some form of protection of his/her asset due to fire or
theft in addition to the basic third party liability for
bodily injury/death and/or property damage.

However, the policy does not cover any other form of

accidental loss of or damage to the vehicle.
Most policyholders have found it is more cost effective and
worthwhile to pay more and be protected under the
Comprehensive Policy, which provides indemnity to the
insured against loss of or damage to the motor vehicle and
third party liability.
While it is the widest form of cover available, it does not
provide cover for every conceivable type of risk.
More importantly, this policy covers any type of accidental
damages to the insured's own vehicle in addition to fire and
theft including theft of parts in or on the vehicle.
Basic difference in Motor policies
Indemnify the Insured against loss of or damage to motor vehicle and/or its accessories & spare
parts (subject to certain exclusions):
By Accidental external means
By Fire, external explosion, self ignition, Lightning or burglary/house breaking or theft
By Malicious act
In transit by road, rail or inland waterway, or elevator
Reasonable cost of protection and removal to the nearest repairers approved by the company &
redelivery to the insured not exceeding Rs. 1,000-
• Any purpose other than that of the Insured’s business.
• Carriage of goods (other than samples) in connection with any trade or
business.
• Carriage of persons/goods for fee or reward.
• Organized Races, rallies, Trials ,Exhibitions or speed contests.
• Hiring or Letting
 GENERAL EXCLUSIONS

Any accident loss or damage outside the land limits of Sri Lanka
Claims arising out of contractual liability.
Being used for the purposes of ‘Excluded use’ described in the
certificate of insurance.
Being driven by a person defined as ‘Excluded driver’ described in
the certificate of insurance .
Flood, storm and other atmospheric disturbances and convulsions of
nature, war and allied perils.
Any accident loss or damage due to consumption of liquor
 Commercial vehicle comprehensive policy

• Commercial vehicle comprehensive policy also

provides cover in respect of loss/damage to vehicle
and legal liability to 3rd parties, subject to certain
exclusions.
• This policy has only two sections. i.e Own damage
and Liability to 3rd parties.
• Medical expenses are not payable.
• The rest of the perils are as same as private car
policies.
• Loss or damage to accessories & spare parts from theft
is covered only if the vehicle is stolen at the same time.
 Commercial vehicles – Section 2 – Third party liability limits

• Legal liability cover is provided subject to certain exclusions,

provided the person who is driving the vehicle in not entitled to
indemnity under any other policy.
• Unlimited legal liability in respect of death or bodily injury to
people on the road by the use of the vehicle including loading
and unloading of such vehicles.
• Damage to property arising out of one accident up to
Rs.15,000/-
• Legal liability of Rs.2,000/- per passenger in respect of
death/injury for any one accident in respect of Passenger
Carrying Vehicles as per section 100 of MTA-1951
• All costs and expenses incurred by the insured with the consent
of the Insurer.
 STANDARD EXCLUSIONS
Section 2 – Third Party Liability - Commercial Vehicles

Death, injury or damage beyond the limits of carriageway.

Death or injury to persons in employment with the Insured

Death or injury to passengers

Damage to property held in trust or under the insured’s control

Damage to any weighbridge, road due to vibration

 Limitations as to use – Commercial vehicles

• Whether vehicle belonging to an individual or a

company, can not be used for :-
• Commercial vehicles used for private purposes
(private lorries/dual purpose vehicles) can not be used
for business purposes other than the business purpose
of the Insured.
• Carriage of goods/persons for fee or reward.
• Races, Rallies, Trials, Speed Contests, Exhibition or
in connection with the same.
• Hiring or Letting
 POLICY EXTENTIONS

• Riot, Strike, Civil Commotions and Terrorism

• Personal Accident Benefits
• Workmen’s Compensation
• Learner Driver
• Glass breakage cover
• Increased towing charges
 POLICY EXTENTIONS
• Specified Natural Perils

• Airbag Extension

• Passenger Liability (Commercial Vehicles)

• Goods in Transit (Commercial Vehicles)

• Inclusion of specified items (Commercial Vehicles)

• Increased 3rd Party Property Damage Cover (Commercial

Vehicles only)
• The extension of cover is granted for and on behalf of the Government
Fund (now NITF)
• The premium rate is determined by the FUND.
• All terms and conditions are been governed by the said FUND
• Any accident, loss, damage to vehicle or liability directly
caused by:-
• The act of any person taking part together with others in
any disturbance of the public peace.
• The action of any lawfully constituted authority in
suppressing or attempting to suppress or in preventing or
attempting to prevent any such disturbance or in
minimizing consequences of such act.
• The willful act of any striker or locked-out worker done in
furtherance of a strike or in resistance to a lock out.
• Can be arranged for Insured, Spouse, Named person, Paid
driver and Passengers.

• Cover provides capital sum benefits for death & permanent

total disability and in certain instances weekly benefits for
temporary total disablement.

• Currently given for ages between 16 and 70.

• Standard PAB cover excludes SR & CC and Terrorism.

• No weekly benefits are payable under Terrorism extension.

 Limits of PAB cover

• 100% of the SI during any one period in respect of any one

person.
• 1 million arising out of any one occurrence in respect of all
persons covered.
• Excludes intentional self-injury, suicide or attempted suicide,
physical defect or infirmity.
• Accidental happening under the influence of liquor or drugs.
• Payable to the injured or his legal representatives.
• Limited to licensed seating capacity of the vehicle.
 Goods in transit extension
• For goods carried in commercial vehicles by declaring the
maximum value and nature of goods.
• Cover provided is damage caused to goods by collision,
impact or overturning of the carrying vehicle but excluding
fire and explosion.
• Fire, explosion, SR & CC, Terrorism could be included with
an extra premium.
• In the event of a claim, average applies if carried more than
the declared value.
• Goods cover is subject to reinstatement basis.
 Workmen’s compensation insurance

• An employer is legally liable to his employees for bodily injury

or death arising out of and in the course of employment both
under common law as well as Statute.
• WC ordinance No 19 of 1934, WC ordinance No 3 of 1946,
WC ordinance (amendment) Act No 15 of 1990.
• WC ordinance does not make it compulsory for an employer to
take out an insurance policy to cover his liabilities towards
employee. In certain European countries it is a statutory
requirement.
• If cover has been bought under a separate policy, then motor
extension does not arise.
• This could be extended for SR & CC and Terrorism as well.
• Motor policy provides cover only licensed permitted driver
drives the vehicle.
• If used to learn driving by any person, extension to such
activity has to be granted subject to conformity with the
regulations laid down by the MTA.
• This extension is always subject to an excess.
• Current minimum ages to drive/ride a vehicle as per MTA
123(2) is 21 years for motor tricycle, van, motor coach or
lorry and 18 years for other vehicles.
• Towing charges are generally limited to Rs.1,000/- under
standard comprehensive policy.

• This will allow reimbursement beyond standard limits.

• There is no upper limit, but up to any economical limit could

be taken.
• Cover for windscreen/windows against non-accidental
damages.
• Salient features :-
• NCB will not get effected
• Policy excess not applicable
• Paid irrespective of cause of damage.
• Legal liability to passengers are excluded except in respect of
passenger carrying hiring vehicles. Limit is Rs,2,000/- as per
section 100 of MTA.
• Could be increased to :-
Passenger carrying hiring – Up to Rs.500,000/-
Other passenger carrying vehicles– up to Rs.500,000/-
Private/Hiring lorries – generally not allowed, but
could be extended to Rs,5,000/- with a maximum limit
of Rs.20,000/-
• Buses plying in co-ordination with SLTB – unlimited
passenger and property damage.
 Increased 3rd party property damage

• Liability under standard commercial vehicle policy is

Rs.15,000/-

• This could currently be extended up to Rs. 2 million with

the consent of the Insurer.
AI in insurance is the future
• For an industry that has proven resistant to change
for centuries, insurance is now undergoing a digital
revolution.
• Assessing risk
• Detecting fraud
• Reducing human error
• Assessing damage parts in vehcles

NITF training_Nov_2022 2/28/2024

AI in insurance is the future
• The new artificial intelligence technology at the
Fukoko Mutual Life Insurance company will be able
to read tens of thousands of medical certificates and
go through the hospital records and medical histories
and surgical procedures (if any) before calculating
payouts.

NITF training_Nov_2022 2/28/2024

How is AI Impacting Auto Insurance?
• Despite fears of a negative impact on the auto insurance industry, AI
will enable human workers to operate more efficiently -- as long as
companies adapt and change with the technology.
• Behavior policy pricing will become the norm -Insurance
companies have long adjusted auto policies based on a driver’s
history and behavior. However, smart technology and AI may
transform auto insurance companies into hardware companies to get
real-time behavioral data.
• Customer personalization will attract buyers -Many companies
have already implemented AI in the form of chatbots to interact with
customers without human input.
• Claims can be settled faster -Settling and paying claims can happen
much sooner after an accident occurs, thereby decreasing the
likelihood of fraud.

NITF training_Nov_2022 2/28/2024

• Claims are the very reason insurance exists
• Our entire industry is built around the premise that
we must help the policyholder in his hour of need.
• At the time of a loss the true value of our industry
becomes apparent.
• We have a duty to our policyholders and to society to
get it right.
• Hand phone – 0767-238069
• E-mail : 4s6rav@gmail.com
• Radio : 4S6RAV (HF & VHF)
Have a nice day!

NITF training_Nov_2022 2/28/2024