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Compulsory Third Party Insurance Law Remains Unenforced



In a few weeks, the proclamation that compels all vehicle owners to have third party motor vehicle insurance will mark its third year.

Signed into law by the president on January 9, 2008, this proclamation was meant to enter into force immediately after its publication in the Federal Negarit Gazette, according to Article 38. However, legislating laws is one thing; enforcing them is another.

Prior to its signing, the introduction of Compulsory Vehicle Insurance against Third Party Risks (CVIATPR) in Ethiopia had been long overdue, if not historically precarious. More than 38 years had passed since the idea of the scheme gained public attention, following the promulgation of an Insurance Proclamation, in 1970. Even after the latest proclamation (No. 559/2008), enforcement of the scheme is still lingering, extending Ethiopia’s “CVIATPR cover free” years to 41; a situation, perhaps, unusual in the rest of the world.

While the effort of legislating the proclamation is beyond doubt a commendable job, it is distressing to see the three-year deferral of its implementation – heaven only knows for how many more years it may continue – in a country with a soaring road accident rate.

In almost all countries, laws require all owners and drivers of vehicles to have third party insurance. It is a form of liability insurance that pays for damage to someone else’s property or for injury to other persons resulting from an accident for which the insured are judged legally liable. However, this insurance policy does not pay for collision damage, fire, or theft of the policyholder’s own vehicle.

There are many forms of motor vehicle insurance, varying not only in the kinds of risks covered, but also in the legal principles underlying them. Ethiopia has come a long way in introducing the particular law to protect third parties from possible injury and damages.

With the advent of the Insurance Proclamation, the Insurance Controllers Office (ICO) was keen to deal with all insurance matters right after its creation, but waited for a foreign expert to study the CVIATPR scheme and make recommendations to the government.

In 1971, UNCTAD provided one of its insurance experts, K. Friedman, an American national, who started drafting the CVIATPR instrument while working on other insurance related matters. To its credit, UNCTAD still ardently supports developing countries in insurance related projects. 

Friedman was replaced by a Swedish insurance expert, C. O. Enhagen, who largely finalised the work. He recommended a scheme based on the principle of a “no-fault” system based on a similar scheme practised in Sweden for 20 years.

Under a “no-fault” scheme, the claimant does not have to establish negligence on the part of another in order to receive compensation. The compensation or benefits, as provided in the scheme, are payable to victims irrespective of the driver’s fault. Relief is also given to victims of hit-and-run accidents where the offending vehicles are not identified.

The “no-fault” system does not assure complete justice to parties who would normally be plaintiffs and defendants. However, it provides a type of average justice for all who might be injured as a result of motor car accidents and attempts to provide this justice speedily and economically. The essence of the system is simplicity.

It is a compromise, because it provides for prompt payment of medical bills and other actual expenses of the injured person without requiring proof that any driver was at fault in the accident, but it does not allow the injured person to recover money for pain and suffering unless a “serious injury” was sustained. Where the “fault” system applies, the victim has to prove that the accident was caused by the fault of the driver (or someone else). Both systems are prevalent in different countries of the world.

CVIATPR concerns road use management, and the responsibility to put the regulations through hinges upon the Road Transport Authority (RTA) under the Ministry of Transport and Communications (MoTC). The scheme establishes statutory insurance under which powers and responsibilities are to be exercised by parties to the scheme, the authority, and licensed insurers. The leading role played by the former Ministry of Commerce and Industry (MoCI) resulted from the ICO being under its control. The insurance firms operating then, most of who had foreign insurance advisors, also lent a hand in the effort. 

As a result of the change of government that came about after the 1974 Ethiopian Revolution, the success of the CVIATPR scheme drafted by the ICO was hampered. The ownership of the financial institutions was transformed from private to public, subjecting the people of Ethiopia to the evils of monopoly. The supervisory role of insurance firms was also shifted from the ministry to National Bank of Ethiopia (NBE), which remains the case today. The CVIATPR returned to square one.

On NBE’s initiative, the Ethiopian Insurance Corporation (EIC) and the concerned ministry resuscitated the idea of CVIATPR much later, during the Derg regime. Piles of studies and recommendations on the scheme were handed over to government officials at the time, but, the documents were fated to only warm shelves until the demise of the regime, in 1991. Another 16 years elapses before the kickoff of the CVIATPR legislation, when a new proclamation was issued, in 2008.

Ethiopia is among the record holding countries in pedestrian manslaughter and serious bodily injuries caused by motor accidents; the value and significance of the CVIATPR for the

victims is more than obvious. Due to an annual increase in the number of motor vehicles, the reluctance of drivers to strictly adhere to traffic regulations, the lenient traffic control system (driving under the influence of alcohol and khat), and substandard roads, the consequential losses of life and property in motor accidents are horrendous. It is urgent to implement the long-awaited CVIATPR legal instruments in order to provide victims with relief.

Ethiopia is the only member in the Common Market for Eastern and Southern Africa (COMESA) club lacking third-party insurance. It is possible that Ethiopia could be second to none in the world still dawdling without CVIATPR. Eritrea, a new member to the UN, introduced the scheme in 2002, with a strict liability system, including compulsory seatbelt regulations.

COMESA’s “Third Party Motor Vehicle Insurance Scheme,” popularly known as the “Yellow Card,” has become one of the most important instruments of facilitation of movement of vehicles, goods, and persons in both the COMESA region and outside. The scheme was introduced in July 1987, and its main objective is to provide a guarantee for road accident victims, fair and prompt compensation for damage or injury they may have sustained as a result of road traffic accidents, and facilitate the movement of vehicles between member states.

In this scheme, a motor vehicle must buy and hold the “Yellow Card,” (in Europe it is called a “Green card”) before crossing the border of COMESA or non-COMESA states.

It is crucial to enforce the 2008 proclamation, which will not allow drivers to be on the road unless they have a valid policy from a licensed insurer that pays compensation to victims in case of the loss of life, bodily injury, damages to property, and emergency medical treatment caused by the insured vehicle.

“No person shall drive or cause or permit any other person to drive a vehicle unless he has a valid vehicle insurance coverage against third party risks in relation to such vehicle,” states Article 3 (1) of the proclamation.

That is the minimum cover that a vehicle owner or driver is obliged to obtain, by law. Failure to abide by the prescribed requirements of the proclamation and ensuing regulations is contravening the law and result in serious consequences.

A fine between 3,000 Br and 5,000 Br or up to two years of imprisonment is stipulated in Article 37 of the proclamation. Depending on the gravity of the offence, some countries suspend the offender’s driver’s licence, too.



Eyobed Tibebu, a lawyer and chartered insurer, is a freelance insurance trainer and advisor. He can be reached at or

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