Pushing Malaysian Motor Insurance Pool (MMIP) to the limit….

 

If your corporation is operating a reasonable large fleet of buses, would you consider just buying all the third party insurance policies from Malaysian Motor Insurance Pool (MMIP) and then insure the non-third-party coverage with another insurance provider (the usual insurance company)? Don’t ask me the question of, “Can or cannot?” – just need to assume such form of splitting can be done…….. as of now. With most insurance companies, if not all,  are throwing out buses, and with MMIP’s extra high premium loading, such splitting in coverage purchasing really makes good sense.

….splitting of Motor Insurance cover into third-party liability and property…. really make sense, especially the liability part is purchased at MMIP with the other part with the conventional insurer”


Let’s do a simple analysis of the premiums chargeable under the above proposal.

MMIP price-tags
Third Party Comprehensive
RM950.40 RM15,263.04
Premium tabulated based on the following assumptions:

  • Fleet of Omnibuses
  • No NCD is assumed in computation
  • Licensed seating capacity is for no of passengers not exceeding 24 people
  • Sum Insured of a bus is RM250,000
  • Bus has no trachograph meter installed or not functioning to expectation





The MMIP price tag shows a whopping RM15,000 odd premium for comprehensive and that’s for just one of your older buses! But just last year, your company was only paying some RM9,539.40 (before NCD) for the same vehicle!

Let’s be abit innovative, after deducting the third party insurance cover with MMIP of RM950.40, your company is left with a balance of RM14,312.64 for that same bus. There should be alot of constructive things those insurance companies can do with that balance amount of premium. Perhaps dangling a RM10,000 premium to the insurance companies can open up all possibilities…..

So what are the possibilities the insurance companies could be working on?

  1. They can sell you a Motor Insurance policy solely to cover both the own-damage and theft risks – this means the third party liability section of the Motor policy would be excluded together with those usual statutory attachments, or
  2. They can provide you with a Master Own-damage & Theft only policy, where only certificates would be issued for each and every vehicle declared. Likewise, coverage should be similar to those in item 1 above.

Option 2 looks much better when such offering can be tactically concealed from the markets and there less susceptible towards any complain that may exposes a Motor tariff breach! With a Master policy, the coverage can be disguised and clothed under the Equipment Insurance policy! Moreover, option 1 that includes the issuing of individual policy may create an outright breach of the motor tariff….. “Such offering can be tactically concealed from the markets…. least it is exposed to complaint for breach…. and a backlash from MMIP!”

Where can you buy insurance involving such SPLITTING of coverage! Trust me, I did come across such practice – there are indeed insurers out there providing you with such option, splitting the third party policy for MMIP and then insuring the non-liability covers with an insurance company that would issue your company with Master Motor (non-liability) policy and individual certificate issued for each and every declaration of those buses.  Issuing a Master policy makes administration a lot more easier – the master policy can be packaged specifically as a facultative-obligatory surplus placement or merely procure an Excess of Loss protection on all such premiums retained in net account. These two forms of arrangement are preferred over just passing the risks on to their treaty programme – don’t want to arouse the markets…..

Anyway, the risk of doing so falls on the Insured….. you cannot get away when MMIP eventually finds out! What if this is right in the middle of a large claim surfacing! Let the buyer beware or…. was it “caveat emptor”? “But then, why not when you have about 100 units of buses!”

With all the insurance companies having equal shares, those that are the lesser motor players would be feeling the heat if such selective purchasing becomes rampant.

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11 comments for “Pushing Malaysian Motor Insurance Pool (MMIP) to the limit….

  1. May 20, 2010 at 09:34

    Good information on Selective motor purchasing against MMIP | Malaysia Insurance Online . As I have read other online views on the same I think the details are well reflected on this.It was a good way of spending evening on Wednesday . I’ll visit again to read more on this website and hope to gain more knowledge.

  2. March 26, 2010 at 20:03

    Here you can get all the insurances you need Free Insurance guide.

    • March 28, 2010 at 22:36

      Dear fair car insurance…. give me a breathe, get me some links to your site and other sites as well!

  3. Ng Eng Yew
    March 15, 2010 at 22:36

    This is clear breach of tariff – anything that should be insured under motor cannot be taken up by another class. These issues had been tested before in the 80s where some equipments were insured with TP coverage but the OD they get a cheaper rate by buying equipemtn policy (below tariff). Doing this will also have issues with respective RI agreements where the insurer has entered

    • March 16, 2010 at 02:01

      Whatever deemed a breach in the 80s may surface again! I do not think that particular company has any issue with their treaty because they can retain for their absolute net up to RM300k per vehicle with the balance of the max value per vehicle value ceded out to (re) insurers on a proportional basis. If the vehicle suffered a total loss of RM1m, then the insurer net loss is RM300k (assuming the max value is also RM1m) with RM700k recovery from those participating in the fac-oblig RI placement. Only problem is when there is an event loss involving few vehicles, ie. a devastating fire which burned 10 of the Insured’s vehicles with each at SI of RM1m. The insurer would have to pay a total net account loss of RM300k x 10 which is a whooping RM10 million….. BUt then who cares…. such event loss is too remote so they said! Is it???

      • Ng Eng Yew
        March 16, 2010 at 05:47

        There is a possibility of anything happen – treaty do have exclusions as well. So in this scenario, should this case go under the Misc Surplus or Motor XOL? If under Misc Surplus, the exclusion of “road use” is there. If under Motor XOL, the intention of splitting is not to insure it under a motor policy hence defeating the purpose. Better relook at the wordings (both treaty and current motor wordings) and motor tariff provisions – if needed these must be revised.
        As for fac arrangement – not many insurers will want to commit on busses, A Permit etc

        • March 17, 2010 at 00:34

          Don’t think they will insure the portion concerning own damage, fire and theft under Equipment insurance, thus not question of Misc Surplus involvement although they might involve the Non-Marine XL. Don’t think they will place under their Motor XL or CXL as the treaty leader may not agree with such form of underwriting. What the insurer would be doing is to take their retained portion up to their net account with the balance of the SI ceded out to a fac-obligatory surplus arrangement. This fac-oblig arrangement is likely to be taken up by reinsurers. Completing the fac-oblig placement is no difficult task…. since I did see one such placement circulating around in the market. With the long tailed third party liability risks taken away and the own damage… cover being paid a handsome sum (c/w high deductible), I am also tempted to take a share…..

  4. Chen DT
    March 4, 2010 at 23:21

    Can this be done? It is a breach of the motor tariff as it does not provide for buying solely non-third party liability cover. I hope MMIP is already aware of all this.

    • mikechan
      March 9, 2010 at 01:05

      nowadays who care I bet PIAM with their too old and conventional ways of auditing cannot even pick up anything in this regards!

      • March 9, 2010 at 21:55

        Mostly act on report…. Probably auditing should go downstream – towards the IT & System channel

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