The New Motor Insurance Cover – taking a glimpse……..

SORRY GUYS! THERE CAN ONLY BE ONE OPTION... SOMEONE GOT TO GIVE WAY!

Judging from the many hits to my previous postings relevant to this topic – 408 hits to blog posting: Difficult buying your Motor Insurance? Try Malaysian Motor Insurance Pool and 271 hits to another: The National Third-Party Bodily Injury Liability Scheme…. jumping the gun or what? within a two and a half months period….. I have to conclude there were massive searches out there for information on the future development of the Malaysian motor insurance industry. Scouring information vide my c-panel, I also noticed searches attaching to those incoming traffic pointed to the fact that many of the readers were indeed having a HARD TIME looking for the best insurer to buy motor insurance cover and also to check on the most appropriate pricing structure.  The phrase, “Malaysian Motor Insurance Pool” or its acronym, “MMIP” was the most searched for by this group of consumers… alas, MMIP somehow failed to deliver their part of their bargain, ie. not too sensitive to the consumers’ needs.

THE NEW MOTOR INSURANCE COVER…….

Having said what was supposed to say, we shall take a look or rather a glimpse of what’s ahead in the next one or two months to come. You would probably know by now, with the many press reports that the National TPBID Scheme is more or less in place…. a matter of appeasing some unsettled spirits moving forward! And, after the first round of discussion with the CONSUMERS groups, the outcome seemed to favour faster TPBID settlement, LESSER LEGAL RECOURSE or rather avoiding the COURTS PROCEEDINGS!  “…first round… the legal fraternity is ONE DOWN!”

Without going into the details of the Scheme and the available options, we shall start off with the proposed NEW PRODUCT STRUCTURE from the winning option…..

 

THE NEW MOTOR INSURANCE STRUCTURE (proposed)

BASIC COVER

COMMENT

Mandatory Third Party Bodily Injury & Death (TPBID)

Comparing to existing form, nothing has changed as far as Basic Cover is concerned. No right minded person would buy a standalone TPBID or ACT policy because of the minimum premium imposed per policy.

The real difference – there is a FIXED SCALE of compensation with LIMITS pegged on various HEADS of damages and the overall maximum claimable under TPBID is RM2 million per life / injured person.

TPPD should be exactly similar to the current version.

√ Third Party Property Damage (TPPD)

OTHER MAIN COVER (Optional)

COMMENT

√ Third Party Liability (Voluntary Top-up)

There is this Top-up because of the limits to what is claimable under TPBID, which is either FIXED or LIMITED, with the maximum being set at RM2 million.

This top up is more towards protecting one’s legal liability position just in case the third party insisted on pushing through with legal recourse (although this may be limited…. under the new scheme) over and above the RM2 million limit.

√ Theft

There may be some 5% to 10% discount on the gross premium for those vehicles fixed with approved anti-theft devices.

For those vehicles without any anti-theft device, especially the older vehicles, there should be a penalty clause in event of a theft loss!

√ Own Damage

Unlikely to see differences in the new coverage form but premium may be lower for newer vehicles

EXTENSION TO COVER (Optional)

COMMENT

Examples: Passenger Liability, Windscreen and Flood

Basically these are those currently available in the tariff….. premium should remained at current level.

(extraction from Bank Negara Malaysia – Proposed Basic Motor Cover Framework presented on 16 April 2010)

Having gone through the above details, there is NOT much of a difference between what’s current and those being proposed. What is clear is the formulation of a fixed scale of compensation like costs of medical, surgical, medicine, doctors’ charges…… and the overall maximum should not exceed RM2 million per life / injured person. In this regard, it is EXPECTED that the legal costs is part of the computation…. thus this new scale of compensation is a dampener for those claimants thinking of pursuing the legal recourse!  “It is good to know the legal costs would be part of the computation…. within the scale of compensation…if at all the claimant push towards whatever limited legal recourse available”

It is expected also, an INDEPENDENT DISPUTE RESOLUTION council would be set up to deal with arising DISPUTE…. This was calculated to PUSH FOR FASTER SETTLEMENT OF TPBID claims.

THE INSURER’S PERSPECTIVES…..

Insurers / Takaful operators (“Industry”) should be happy, a little happier….but not too happy with this proposal as a New Company (“Newco”) would be set up to take over the TPBID segment, with the majority to be owned by the government. The industry would still need to own a small share of the TPBI-Newco and must continue to pay an annual levy to support the TPBID Newco. The industry shall act as agents for this Newco…

This simply means the industry is more or less able rid itself to a large extent from the crutches of the long tail elements of TPBID claims… passing them over to the Newco. Whether the premiums would be increased if the TPBID Newco continues with losses, it’s your guess over mine!

THE DAYS AHEAD…..

Looks like the earlier rounds of discussion with both the consumer groups and the insurance / takaful industry favoured Bank Negara. It is a WIN – WIN position for the three stakeholders. Consumers get the same premium level and faster settlement of claims in exchange of limited legal recourse. The industry gets the long tail TPBID claims elements released out to a Newco, thus freeing their capital for realisation of further business growth. Bank Negara should be happy knowingly that the thorn in the RBC flesh is taken off somewhere…. thus buying them further time to strategise on the next best move. 😆

Do you agree with me? You can comment in my comment form below…..


 

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17 comments for “The New Motor Insurance Cover – taking a glimpse……..

  1. charles goh
    January 11, 2011 at 10:44

    Is this new motor insurance cover available already? Where can I buy this for my car, Ford Escort 1982?

  2. Anonymous
    December 21, 2010 at 18:55

    can you share with us the so call” Foreig workers Compulsory MEDICAL scheme”..who are the MCO ?why can’t they just “blended/merge” the Medical & FWCS into a single policy and charge only 1 fee (management company) …apprently the consumer are paying 2 management to 2 management company.this 2 company combined fee charge is taking up more than 10% per head.insurance agent is getting mere 10% comm.Pls share..

    • December 22, 2010 at 12:28

      We are checking this out…. information quite limited for timebeing.

  3. STEAVEN
    October 6, 2010 at 17:59

    it has been such along time since BANK NEGARA asking for puiblic opinion.Perhaps you can share with us what is happening to those hooo haaaa.What the next move by the Government?

    • October 9, 2010 at 12:24

      Supposed the whole thing is going miscarriage as I see it. Anyway, be prepare for this thingy called, “No fault liability scheme” coming up very soon.

  4. June 17, 2010 at 17:21

    well written blog. Im glad that I could find more info on this. thanks

  5. Pai
    April 19, 2010 at 08:40

    Is the levy imposed on the insurers for tsupporting the Newco in addition to the present insurance guarantee scheme fund (igsf) 0.25% of gross premium written?

    • April 20, 2010 at 00:04

      The IGSF is across all premiums, but this TPBID is in respect of levy on Motor premium

      • Pai
        April 20, 2010 at 10:38

        The only thing that I see benefits the insurers is taking out the TPBI portfolio from their balance sheet. Thus the technical reserving is more certain and stable with limited long tail development factors.

        Care to comment?

        • April 24, 2010 at 20:52

          I supposed this is the first and most important thing in the mind of Bank Negara when they coin out such a TPBID Newco. Taking away the long tail element from the balance is one way of improving the insurer’s financial position from the perspectives of the RBC framework. Unlike the MMIP where all non-life insurers are in on the basis of unlimited liability for their equal share in the company…. MMIP would normally calculate the bottom-line and then divided by the total number of insurers and advise the insurer to insert the bottom-line figures into the balance sheet.

          I also supposed RBC framework would not be imposed on this Newco, thus things may be more forgiving there….

          But then over the longer term you may find serious issues when the management of the Newco failed to manage the losses and shareholders are then required to top up their contribution towards the losses….which I supposed is no difference from the practice as in MMIP. In addition, levies are then further imposed on insurers to help out with the long tailed losses!

          THus this Newco concept is more a short term solution and unless you have a more concrete plans to move forward after the Newco set-up, the same old problem would come revisiting the industry…. all over again!

      • April 22, 2010 at 00:27

        Will there be an issue (or back to sq one) for the insurers if the levy is too high to support those losses to the New Company?
        How much share would be insurers required to take up?
        Will the insurers be given strong representation on board?
        What would be the scale of compensation like? If we cut certain medical costs based on the “scale” from what were charged by the hospital, would this translate into losses to the third party claimant?

        • April 24, 2010 at 21:02

          Not too sure about most things but our opinion was already given awhile ago….

    • kelvin
      May 1, 2010 at 10:29

      I believe this motor related third party injury stuffs are a world wide issue – problems in Hong Kong, Singapore, India, across Europe as a matter of good example. At least when the government is not prepared for premium increase, they are prepared to fund this Newco to the extent being the majority shareholder. In this manner (whether you call this subsidies or otherwise), a big chunk of the third party injury losses would be taken up by the government leaving more financial space for the insurers to work their business forward.

      • May 1, 2010 at 20:44

        Yes… this so-called majority stake is as if the government has provided the premium increase for the industry. We have to think in this manner, otherwise it becomes extremely difficult for the industry members to make good comparison. You are correct to say this is a global problem and if the government is not taking over now, they would end up at ta later date.

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