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July 9, 2010

3rd-party Insurance Draft will be sent to Govt in Dec

KUALA LUMPUR: Bank Negara will submit the final proposal for a new basic third-party motor cover scheme framework to the Government in December.

In a statement yesterday, the central bank said it had, together with the Ministry of Finance, completed initial consultation sessions on the proposed framework with key stakeholders in April.

A consultation paper, explaining the rationale for proposing a basic scheme, guiding principles, objectives and broad features under consideration was posted on Bank Negara’s website for members of the public to provide their feedback on the scheme.

As at end-May, 125 respondents submitted their feedback via email, memoranda or letters to editors of national newspapers.

Feedback had been received from the public, consumers, transport and business associations, political parties, Members of Parliament, the Bar Council and lawyers, insurers and insurance agents.

The majority of respondents concurred that the priority of the reforms to the insurance scheme, in relation to the third-party motor cover framework, should be on addressing issues of delays in the motor insurance claims settlement process.

The majority were also open to the need for gradual adjustments to the motor insurance premiums to address price misalignments and to the possibility of moving to a risk-based pricing system.

There was agreement that this move would encourage safe and responsible driving as well as ensure the availability of motor insurance coverage in the long term while spurring competitiveness and increased efficiency among general insurers and takaful operators.

Most respondents also raised concerns on the expected cost to the Government in setting up a new entity to oversee and manage the new scheme.

On the proposal to cap third-party injury and death claims, some respondents were in favour of the imposition of reasonable caps on overall claims while certain segments felt that restricting the rights to, as well as having limits on the amount of compensation, could result in accident victims being insufficiently compensated.

Meanwhile, the possibility of adopting a No-Fault-Liability system to replace the existing system as a more equitable approach in ensuring accident victims were promptly compensated was also raised by some respondents.

While those in favour of such a scheme considered it a solution to the current inefficiencies, others voiced objections that this might not be a practical system for Malaysia and might not provide sufficient compensation.

In the statement, Bank Negara said all feedback received were being taken into consideration and further engagement with stakeholders would be undertaken to provide a holistic solution. – Bernama

that ensured adequate protection to motorists and road users at reasonable premiums.

The review will involve resolving the appropriate overall limit of compensation; enhancing the existing court system to resolve disputes; phasing-in of additional measures to enhance the efficiency in the overall claims settlement process and instituting gradual premium adjustments over time to reflect the cost of insurance.

The infrastructure to support the framework will also be further reviewed to minimise the costs to the government, taking into consideration, the constructive feedback received.

In addition, extensive efforts will also be undertaken towards significantly improving the overall claims settlement process which would require the full support of all relevant stakeholders.