Compulsory Third Party Liability Insurance

The fight over who should write the CTPL insurance is not yet over.  What’s the controversy, in the first place?

The law compels the motor vehicle owner to procure a valid Third Party Liability Insurance and present the insurance policy upon filing of application as a requirement in the registration with the Land Transportation Office (LTO).  However, there are unscrupulous entities or persons who are issuing fake insurance policies.  To curb this malpractice, several systems, procedures have been devised and implemented.  But these systems and procedures were no match to the issuers of fake insurance policies.

And now, another solution is being offered - the Government Service Insurance System (GSIS) shall monopolize the issuance of the CTPL insurance policies. The private insurance companies are decrying this solution.

First, it’s COMPULSORY to procure a third party liability insurance.  Now, it would become COMPULSORY to procure it from GSIS only.

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Mr. Honesto General wrote a column entitled: “CTPL: Cure worse than the disease” in the Philippine Daily Inquirer.  He first mentioned the history of CTPL; then his opinion.  I am encouraging you to read it here to better understand the CTPL.

Insurance Commission changes its position on the CTPL issue

The Insurance Commission (IC), with its new head - Atty. Ernesto Malinis, has changed its earlier position on the Compulsory Third Party Liability (CTPL) issue.  It now favors the proposal of the Government Service Insurance System (GSIS) to be the sole provider of this insurance policy to eliminate the issuance of fake CTPL insurance policies

"I studied the proposals (to address the rampant sale of fake CTPL policies), and saw the GSIS model to be superior than the others," said the new insurance commissioner.

The former IC head, Ms. Escobillo, together with non-life insurance firms, staunchly opposed the proposal for GSIS to monopolize the CTPL business. 

The Philippine Insurers and Reinsurers Association Inc. (PIRA) filed a petition before a Makati Regional Trial Court (RTC), who issued a issued a preliminary injunction on the DOTC order.  PIRA was saying the DOTC order was unconstitutional because it called for a monopoly.

However, Malinis said: "Not all monopolies are unconstitutional.  Monopoly is all right as long as it is regulated."

Malinis said that should the court eventually decide in favor of the GSIS proposal, then the IC would work on its immediate implementation.

Source: business.inquirer.net 

Interim vehicle insurance system takes effect tomorrow

While the concerned government agencies (DOTC/LTO and DOF/IC) are still discussing about the new and controversial CTPL insurance scheme, an interim vehicle insurance system would be implemented effective tomorrow.

To avoid confusions, please read the Breaking News from Business/Money Section of Inquirer.net.

Also, read the letter to the editor of Ms. Josefina L. Valera, Senior Vice President, General Insurance Group, Government Service Insurance System (GSIS) from Opinion Section of Inquirer.net

Compulsory third party liability (CTPL) insurance

Since the compulsory third party liability (CTPL) insurance was the issue in the news "Non-life insurance firms raise howl over DOTC order", I think we better discuss it.

First, let’s dissect the phrase.  Three (3) elements are involved:

Compulsory means mandatory or required.

Third party.  In insurance, the first party is the "insurer"; and the second party is the "insured".  Do you remember them?  Click here.  Therefore, the third party is any party other than the insurer or insured.

Liability.  It’s a pecuniary obligation for death or bodily injury or harm done to a third party.

In short, it is a mandatory insurance for a possible liability to a third party. 

Who or what requires it?

The LAW (Chapter VI of the Insurance Code of the Philippines - ICP) requires a vehicle owner to secure a third party liability (TPL) insurance as a prerequisite to the registration of a motor vehicle with the Land Transportation Office (LTO)

Who really is a third party?

It was earlier discussed that any person other than the insurer and insured is a "third party".  But wait!  The motor car insurance policy qualifies other parties that do not fall within the ambit of a third party.

Pursuant to Section 373 (c), Chapter VI of the ICP, the motor car policy defined third party;

THIRD PARTY shall refer to any person other than a PASSENGER as defined in the law and shall also exclude a member of the household, or a member of the family within the second degree of consanguinity or affinity of the vehicle owner, or his employee in respect of death, bodily injury, or damage to property arising out of and in the course of employment. 

Are your friends or other persons, who are not your relatives, riding in your car considered third parties or passengers?

Answer:  They are considered third parties and not passengers.   In the definition of a third party, it didn't mention where the third party should be.  Whether they are inside or outside your car, they are third parties.

Passenger, on the other hand, is defined in (Section 373 (c) Chapter VI of ICP):

"Passenger" is any fare paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle's operator or his agents to ride without fare.

In the definition, a person to be considered as passenger, it must be:

• Paying a fare, and
• On board a public utility vehicle.

Here, it mentioned where the passenger should be - on board the PUV.  Once the passenger arrived in its destination and got off the PUV, it became a third party.

Person on board a private vehicle is not a passenger.

What liability is covered?

It covers the liability of the insured in respect of the bodily injury and/or death of any THIRD PARTY in an accident caused or arising out of the use of the insured vehicle.  As such, the insurer will pay, subject to the limits of liability, all sums necessary to discharge the insured from liability.  Liability for loss or damage to property is not covered.

It is primarily intended to provide compensation for the death or bodily injury suffered by an innocent third party as a result of the operation and use of motor vehicle.  It assures the victim and or his/her dependent/s of immediate financial assistance, regardless of the financial capacity of the motor vehicle owner.

How much is the insurance coverage? 

The current CTPL coverage is P100,000.00.  Previously, the coverage was for P50,000.00 only and the increase took effect last year.  Despite the 100% increase in coverage, the premium rates remain the same in view of the good loss experience of the industry.

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Should you need further clarifications, have question/s, find an error, disagreed with the views and opinions, and/or wish to give a suggestion, kindly don't hesitate to leave comments or email at insurance@i.ph or insurance.i.ph@gmail.com