Converging Our Motor Insurance Industry For Asean Cross-border Collaboration

Over the weekend I spent sometime reading through some papers concerning Asean framework agreement on facilitation of cross border transportation of people. This proposed agreement is with the view to promote and ease cross-border movement of people residing within member countries of ASEAN.

How would the motor insurance segment of our industry likely affected by those requirements? Anyway those requirements mentioned in the papers were too general in perspectives.

I was made to understand that this agreement is supposed to be a compulsory one for all ASEAN members who are signatories to the broader agreement concerning ASEAN Economic Community. However, such is still easier say than done…. But for Malaysia having taken to leadership role in ASEAN community building, this should be no second thoughts except to make this a reality as what was then to the European Unions (EU).

 

ASEAN Economic Community

Moving people across ASEAN transnational boundaries

There are 7 parts and 26 articles within the said agreement, and how our motor insurance segment would be affected, I can’t really tell for sure. Anyway those relevant parts and articles that provide some insights into what’s next or a glimpse of the future of our motor insurance industry that’s to come, I have specifically outlined them below:

PART I – GENERAL PROVISIONS
Article 3 – Definitions
For the purpose of this Agreement, the following meanings shall apply to the underlined terms:Road Vehicle: Any mechanically propelled road vehicle that is normally used for carriage of passengers and registered in the territory of one Contracting Party. It does not cover vehicles used for carriage of goods such as trucks, trailers, semi-trailers or vehicles that are incidentally used for carriage of passengers by road, or vehicles with less than four wheels.Passenger: Any person who, in the performance of a contract of carriage made by him/her or on his/her behalf, is carried by a transport operator in the course of the latter’s business.

Non-Scheduled Transport Service: Transport service to carry people for hire and/or financial reward from the place of origin in the territory of one Contracting Party to or across the territory of the other Contracting Party or Parties in the following manners:
i. as part of package tour organized by tour operators; or
ii. for hire by independent travelers.

Scheduled Transport Service: Transport service over a specified route, according to a fixed route table with predetermined stopping places and for which set fares are charged, accessible to everyone either on a first-come, first-served basis, or with prior booking.

Transport Operator: Owner, drivers and/or agents of road vehicles who
i) have the appropriate national permit or license to operate road vehicles and who have a proven compliance record to the rules and procedures under said permit or license; and
ii) are duly registered as cross border transport operators by the respective Competent Authority of the Parties.

PART III – GENERAL CONDITIONS FOR TRANSPORT OF PASSENGER
Article 8 – Traffic Regulations
The Contracting Parties shall endeavour to take appropriate measures to ensure the harmonisation of road traffic regulations in force in their territories conform in substance to the provisions of the Convention on Road Traffic, signed at Geneva on 19 September 1949, the Convention on Road Traffic, signed at Vienna on 8 November 1968, and the Convention on Road Sign and Signals, signed at Vienna on 8 November 1968.
Article 14 – ASEAN Scheme of Compulsory Motor Vehicle Insurance

  1. Road vehicles travelling to the territory of other Contracting Parties shall comply with the compulsory motor vehicle insurance required in the Host Country so as to be adequately insured against death or bodily injuries and for property damages arising from road traffic accidents.
  2. The Contracting Parties agree to conform to the scheme of compulsory motor vehicle insurance as specified in Protocol 5: ASEAN Scheme of Compulsory Motor Vehicle Insurance, under the ASEAN Framework Agreement on the Facilitation of Goods in Transit, signed at Kuala Lumpur on 8 April 2001.
Part V – MISCELLANEOUS PROVISIONS
Article 23 – Compliance with National Laws
Except where otherwise provided in Agreements between the Contracting Parties, including this Agreement:

  1. road vehicles of one Contracting Party including persons shall, when in the territory of the other Contracting Party, comply with national laws and regulations in force in that territory;
  2. neither of the Parties shall impose on road vehicles or persons of the other Contracting Party requirements which are more restrictive than those applied by its national laws and regulations on its own road vehicles or persons; and
  3. the Host Country may temporarily or permanently deny access to its territory to a passenger, driver, transport operator, road vehicle that has infringed national laws and regulations or this Agreement.

 

Article 25 – Assistance for Traffic Accidents
Should the road vehicle of one Contracting Party including persons be involved in traffic accidents in the territory of another Contracting Party, the latter shall provide all possible assistance to the road vehicle and persons, then notify the appropriate authorities of the Contracting Party concerned as soon as possible.Contacting Partiesin this sense refer to member countries of ASEAN being signatories to this said agreement.Host country is the country where transport operation is to be performed.

What are the likely effects on our industry?

My thoughts on this are really about how the staging mechanisms should be and I have to see them in the following light; at least from the perspectives of Malaysian insurers:

  1. [RELEVANT MOTOR VEHICLE RISKS] This agreement is only applicable for vehicles use in the carriage of passengers only, i.e. private cars and commercial vehicles like hire & drive, buses and taxis – in connection to the carrying of passengers across international borders of ASEAN countries (iro those who are signatories to this agreement)
  2. [COMPULSORY MINIMUM THIRD PARTY INSURANCE COVERAGE] There is a requirement for insurers to provide an established minimum third party related coverage in accordance to individual (member) country requirements:
    1. third party bodily injury or death – in this regard we should also see legal liability to passengers be extended if the say vehicle enters Singapore for this is a compulsory requirement in the country, and
    2. third party property damage – limit(s) for individual countries need to be observed

Under the Protocol 5:  ASEAN Scheme of Compulsory Motor Vehicle Insurance, under the ASEAN Framework Agreement on the Facilitation of Goods in Transit there had been established a BLUE CARD which serve as a proof of minimum compulsory third party insurance coverage as required by the host country at point of entry. Not sure if this BLUECARD has ever been issued before but there were provisions in the said scheme catering for the setting up of a National Bureau with members coming from one’s country’s insurance industry for the purpose of making efficiency the collaborations between insurance carriers from member states.

In this regard, it is good to reexamine some of the relevant articles forming part of this said Protocol 5:

Article 6
Issuance of the Blue Card
The Blue Card shall be issued by the National Bureau of each of the Contracting Parties, in accordance with Article 10 of this Protocol.
Article 7
Coverage and Validity of Blue Card

  1. During the period of its validity, the Blue Card shall be proof of existence of an insurance policy for the compulsory motor vehicle insurance described in Article 3 of this Protocol.
  2. The Blue Card shall be valid for a specific period of time not to exceed one calendar year, irrespective of the number of transit transport journeys to be made.
  3. The Blue Card shall be valid for one specific Road Transit Transport Vehicle and shall in no case be transferable.
Article 9Establishment of National Bureau

  1. The Contracting Parties shall establish National Bureau whose function is prescribed in Article 10 of this Protocol.
  2. The National Bureau shall be composed of licensed insurer(s) providing compulsory motor vehicle insurance.
Article 10
Functions of the National Bureau
The National Bureau shall undertake to fulfill the following functions:

  1. Issue the Blue Card to its own country’s Transit Transport Operators after having verified that the Transit Transport Operator has in place a motor insurance policy which meets the country’s compulsory motor insurance requirements;
  2. Sell the country’s motor policies which provides the minimum compulsory insurance to other country’s Transit Transport Operators entering the country;
  3. Stamp on the Blue Card after verifying that the other country’s Transit Transport Operator has purchased the requisite motor insurance policy which meets with its country’s compulsory motor requirements.
  4. Verify, whenever informed of a road accident caused in its territory by the holder of the Blue Card, the circumstances of the accident and on the basis, of its findings, take any action it deems necessary. It shall, in any event, advise the insurer concerned of any claims that it is handling on the latter’s behalf;
  5. Obtain prior authorisation from the insurer concerned before settling any claims;
  6. Seek reimbursement from the insurer concerned on the amount of claims settled.

As it should be, the sovereignty of each country is a priority; therefore the statutory laws of member ASEAN countries in as far as they are of relevance to operations of this said agreement, amendments are likely to kept to a basic minimum. This means insurers in Malaysia providing such minimum compulsory coverage must have the capacity to issue such an insurance policy covering such Transit Transport Operator from another member country. These insurers are likely to be listed on the BLUE CARD, being proof of an existence of such an insurance policy.

  1. In addition, insurers must now need to have better grasp of the legal environment in other member ASEAN countries (with likelihood of increasing transnational vehicles movement), at least in dealing with claims such as theft including recovery and own damage repairs faced by Malaysian Insured whilst travelling to those members’ country.  It is likely that partnership with other insurers operating in member states is unavoidable in order to provide efficient claims handling services and dispensation of prompt payment of claims.
  2. There would be a contingency pool to be established by insurance carriers operating within one’s country with focus to deal with uninsured vehicles (for whatever the reasons) crossing another member state. I supposed this can be achieved with the said National Bureau.

In summary I would like to add that the newly setup Malaysia Motor Insurance Pool (MMIP), (a jointly setup with the Takaful Operators) be called upon to dispense such compulsory cover for such foreign (ASEAN member states) vehicles travelling within Malaysia?

You have a comment? Just let it out in our comment box below.

 

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6 comments for “Converging Our Motor Insurance Industry For Asean Cross-border Collaboration

  1. Anonymous
    February 2, 2014 at 21:11

    Is this gonna be a reality? How would this affects Malaysian insurance roadmap on detarification?

    • February 2, 2014 at 21:27

      Has to be a reality in 2015. Our roadmap needs to factor this in. …

    • February 9, 2014 at 13:20

      Look like ASEAN Community 2015 is becoming a reality, at least for the general insurance industry most will start with insurances for haulage related risks. …

  2. Anonymous
    November 20, 2012 at 18:02

    Nice articles. If you need more information on Insurance you can try http://www.houzofinsurance.com

  3. June 27, 2012 at 17:42

    Nice information, can anybody tell me the good travelling insurance plan for Dubai

    • Anonymous
      July 8, 2012 at 23:05

      Hi, Why not try insurance plans from Berjaya Sompo Insurance at their website?

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