The necessity of compulsory civil liability insurance for car and motorbike owners

Director of Insurance Supervisory Authority Ngo Viet Trung. Photo: TL

Important financial solutions

At a press conference of the Ministry of Finance on January 9, Mr. Ngo Viet Trung said that motor vehicles, including cars and motorbikes, are a source of extreme danger when operating and participating in traffic. Moreover, it might cause damage to the health, life and property of third parties. Meanwhile, in many cases, such as the car owner also dies in an accident or is facing financial difficulties, motor vehicle owners do not have the financial capacity to pay for compensation for the victims, especially in the case of motorbike owners who belong to the working class in society, creating a great burden and instability for the whole society.

In addition, Mr. Ngo Viet Trung said that motorbikes were still the main source of motor transport and the biggest source of accidents in Vietnam. In particular, according to the statistics of the National Traffic Safety Committee, in 5 years of implementing the emulation movement to ensure traffic order and safety in the 2016-2020 period, the total number of registered motorbikes as of October 14, 2020, is 72 million, accounting for 63.48% of the cause of the accident.

Therefore, a representative of the Insurance Supervisory Authority affirmed that compulsory civil liability insurance for motor vehicle owners (including motorbikes) is a financial solution and a tool to transfer risks from motor vehicle owners to insurance enterprises, ensuring financial resources for motor vehicle owners to quickly pay for compensation for the victims, promptly stabilize their lives and business activities, and contribute to social security.

Currently, compulsory insurance for civil liability of motor vehicle owners has been provided by insurance companies since the very first days of the motor vehicle's birth. For example, the first car - a motor vehicle was born in 1885 in Germany, and the car owner's civil liability insurance policy was also issued in 1895 in the UK.

Most countries have now applied compulsory civil liability insurance for car and motorbike owners. Even some countries apply it to electric bicycles, including developed countries that have a low number of motorbikes and motorbikes, such as the US (about 8 million vehicles), the EU (11.6 million vehicles) or developing countries with a large number of motorbikes and motorbikes participating in traffic such as India (221 million vehicles), China (over 90 million vehicles), Indonesia (110 million vehicles), Thailand (22 million vehicles). To ensure the implementation, many countries (India, Japan, Singapore...) have regulated that it is illegal to participate in traffic without civil liability insurance for third parties, and imprisonment may be imposed in case of recidivism or repeated violations.

Continue to amend the regulations

Mr. Ngo Viet Trung said that shortly, the draft Decree, which is about to be issued, aims to synchronize with the Law on Insurance Business No. 08/2022/QH15. It inherits the provisions of Decree No. 03/2021/ ND-CP. At the same time, it continues to review, amend and supplement regulations to increase the rate of spending for compensation for motorcycle owners' civil liability insurance.

Specifically, the draft Decree has added regulations on a fee reduction rate of 15% for vehicles with a history of low compensation to enhance the role of an economic regulator of this type of insurance.

At the same time, increasing the proportion of spending for humanitarian assistance from 25% to 30%, this proposal aims to further increase the spending in case of accidents that deny coverage.

The draft Decree also narrows down the insurance exclusion in the direction of only excluding insurance liability in the case of a driver operating a motor vehicle has alcohol in their breath or blood exceeding the normal value according to the instructions of the Ministry of Health (according to the provisions of Decree No. 03/2021/ND-CP, drivers operating motor vehicles has alcohol in breath or blood causing an accident will not be compensated for by insurance).

In the future, the Ministry of Finance will continue to study and amend appropriately based on fully assessing implementation results, market situation, trends, benefits and related risks.