Type of paper: Research Paper

Topic: Insurance, Vehicles, Tort Law, Party, Liability, Finance, Disaster, Driving

Pages: 3

Words: 825

Published: 2020/10/31

Third party liability insurance defines a coverage for losses damages or even injuries that may be inflicted on another party based on the actions of the policyholder. It is often referred to as third party liability insurance since the coverage’s only deals with the well-being of other parties other than that of the policy provider (Bassett, 2009).
Third party car liability insurance ensures that the damages to a third party health and property that is caused by an accident for which a driver or car owner were responsible is covered. The compulsory third party car liability insurance describes a financial protection system that is built or constructed to prevent any form of grievance that the third parties involved could face (Bassett, 2009). This aspect is due to the lack of solvency of the first party who caused the property damage or bodily injury following any event that is related to a Car Accident.
Motor insurance is measured by the non-life insurer’s strongest class of business in terms of premium volume. In most nations, the third party car liability insurance is compulsory so as to protect the public, in general. Recent studies by World Bank conducted in Central Asia, Africa, and Europe have indicated that the car insurance premiums represent 30% of all non-life premium income. The phenomenon rise in the insurance cover could be because of the rapid rise of motor fleets. Third party car liability insurance has in the past been introduced and poorly understood in the centrally planned economies (Bassett, 2009). This aspect is because motorist tends to view it as any form of tax that they have the freedom to evade, rather than as a form of protection against their personal liability. This is the main concept that has not been made familiar to the general public.
Car insurance contains the potential to be an efficient and powerful tool in the promotion of personal responsibility. If the insurance policy is communicated effectively, then the link between the consequences that occurs because of establishing an accident and the basic economics of paying for the same consequences will gradually lead to more improved driving. Developed countries economies have often worked extensively with the bonus-malus premiums pricing. This pricing has had a more dramatic effect on making the driver feel responsible for his or her driving. It is not within the insurer’s power to change the state and conditions of roads. The standardization method used in determining histories and in assessing claims has a certain beneficial impact on both the insured and the insurer (Bassett, 2009). The databases used gives allowance for more accurate tracking in times of fraud cases while simplifying the assessment of imminent compensation claim by the insurance companies.

The main component of Motor Third Party Liability

The main objective of insurance regulation is to protect the policyholder against the insolvency of the insurance company (Jacobs, 2011). To achieve this goal, there is a range of supervisory and insurance measures that have been established to ensure financial managerial and financial soundness of insurance companies. In third party car insurance liability, there are always guarantee funds that are established to compensate persons who incur bodily injury. This could be injury caused by the hit and run drivers. In addition, the funds are at the same time meant to pay the claims for damages caused by uninsured motorist. The main points in favor and against insurance schemes revolve majorly around the moral hazard and cost. The guarantee schemes are normally financed through contributions, related to the premium income of the insurance companies (Jacobs, 2011). The main elements of Third party car liability insurance include;

Legal and regulatory structure

The element includes the systemic factors such as a role of the courts and the torts, limits, thresholds and the minimum cover. In addition, the legal structure determines whether the insurance cover goes with the car or its owner. The regulatory concerns often relate to concerns over the ability of the insurance consumers to fully compare and understand the various terms and conditions in the insurance contract. The competition level between the insurers will become ineffective and can lead to adverse

Actuarial Methodology

This aspect includes the foundation used to establish the rate of premiums and for posting reserves to meet pending and future claims.

Contingency reserving

The element looks into the state of guarantee fund. The guarantee funds may at the same time deals with various issues that include the insolvency of the insurance companies (Jacobs, 2011). In addition, guarantee funds deals can at the same time deals with the negative effects of untraced driving, uninsured driving, and stolen vehicles.

Claims management and information service

This element includes the mechanism of information sharing, data collection, and claim service.
Reinsurance
The element includes the right approaches used to maximize reinsurance benefit, which essentially should be well tailored to the solvency requirements and the financial standing for the particular insurer.
In conclusion, the rate of accidents on major roads and highways has risen by 30% in the risen past. Over 90% of these fatalities occur in low-income and middle-income countries that have only 42% of the world registered vehicles (Bassett, 2009). These accidents leave a heavy and tragic burden on those directly affected both psychologically and physically. The health facilities in their meager budgets are often overstretched dealing with survivors of the traffic accidents. A comprehensive car liability insurance cover provided by the insurance companies, for this reason, is an essentials necessity in covering for this situation.

References

Bassett, M. (2009). Report on compulsory third party motor vehicle insurance in the ACT. Canberra: Dept. of the Capital Territory.
Jacobs, P., & Lier, D. (2011). The provincial health care costs of motor vehicle accidents for third party liability in Alberta. Edmonton, Alta.: Institute of Health Economics.

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WePapers. (2020, October, 31) Good Research Paper On Finance. Retrieved February 25, 2021, from https://www.wepapers.com/samples/good-research-paper-on-finance/
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WePapers. Good Research Paper On Finance. [Internet]. October 2020. [Accessed February 25, 2021]. Available from: https://www.wepapers.com/samples/good-research-paper-on-finance/
"Good Research Paper On Finance." WePapers, Oct 31, 2020. Accessed February 25, 2021. https://www.wepapers.com/samples/good-research-paper-on-finance/
WePapers. 2020. "Good Research Paper On Finance." Free Essay Examples - WePapers.com. Retrieved February 25, 2021. (https://www.wepapers.com/samples/good-research-paper-on-finance/).
"Good Research Paper On Finance," Free Essay Examples - WePapers.com, 31-Oct-2020. [Online]. Available: https://www.wepapers.com/samples/good-research-paper-on-finance/. [Accessed: 25-Feb-2021].
Good Research Paper On Finance. Free Essay Examples - WePapers.com. https://www.wepapers.com/samples/good-research-paper-on-finance/. Published Oct 31, 2020. Accessed February 25, 2021.
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