Under the provisions of the basic motor insurance, a vehicle, be it a motorcycle, cars, lorries and buses, it is compulsory to have such coverage before the Road Transport Department issues a road tax.

The above is provided for under the Road Transport Act of 1987.

Since 2 or 3 years back, motorists, especially owners of old vehicles of more than 10 years old have found it very difficult to secure 3rd party insurance coverage.

According to my own close insurance buddy, Mr. Ah Peng from one of Klang town’s largest insurance company, even commercial vehicles, some of them completely new are unable to obtain 1st party overage for their vehicles. Just imagine how much difficultly owners of such vehicles face every time their road tax expires.

I should be able to understand the woes and worries faced by the owners of vehicles mentioned above. I should know because my wife owns a 10 year old Iswara.

This year alone, the premiums for the above car come to a whopping RM248. It came with a 1st party insurance coverage RM8000. A ten year old car worth not even RM2500 but forced by the insurance companies to buy 1st party insurance for a sum of RM8000. If that is not daylight robbery, I do not know what else is.

All these months, consumer bodies like Consumer Association of Penang (C.A.P.), the Bar Council, Automobile Association of Malaysia (A.A.M.) and many motorist associations, have pleaded unsuccessfully to the authorities, especially Bank Negara to kindly intervene into this fracas facing insurance fiasco.

Sad to say, Bank Negara has been rather slow to respond to the public request for assistance. However, to be fair to the authorities, it has decided to finally do something about this insurance problem.

There is a saying, “better late than never”. The government, it has been reported recently, has finally deemed it fit and prepared to replace 3rd party motor insurance with a new basic motor insurance policy. In this respect, the public has been urged to submit feedback on the move to Bank Negara by 14th May 2010.

The new basic insurance scheme is said to affect a third of vehicle owners in the country, mostly incorporating motorcyclists. Around 3.54 million of the total 10.8 million motor policies, at the end of 2009 involved 3rd party policies. The rest were to be 1st party policies.

What will the new basic insurance policy which covers bodily injuries and death incorporate?

This policy, known hereinafter as TPBID or Third Party Bodily Injury and Death, for your information is mandatory under the Road Transport Act 1987 under the 3rd party damage clause.

Basically, the new TPBID scheme has a maximum liability of RM2 million. Settlement time is reported to be within 2 – 4 weeks. However, it is left to be seen.

For readers consumption, current 3rd party policy claims has no liability limit. This is good. But remember, it takes between one and 3 years for claims to be settled through. I guess, “you cannot have the cake and eat it at the same time”, as the popular saying goes.

Who will currently undertake the new TPBID 3rd insurance policy scheme?

The answer to the above question is the government and the insurance industry itself.

Reports say, there will be a sole provider and a new company called the TPBID Newco will soon be incorporated for the above purpose.

For a further dash of good news to all of us, in the recent 2010 Budget announcement, the Prime Minister Datuk Seri Najib Tun Razak announced that the basic motor insurance coverage scheme of TPBID will be offered at a reasonable premium which will commensurate with t level of protection it provides.

Well, in my opinion, it all sounds well and good.

Why has all these fiascoes regarding the 3rd party insurance come to affect the insurance industry in the first place?

Firstly, the insurance companies say premiums for 3rd party has not been raised for the past 30 or so years. Operational costs have since risen by leaps and bounds, they say.

Secondly, it should be borne in mind, evidently there are hanky-panky going on in the claims made, resulting in large financial losses to the insurance companies as a whole.

Insurance companies have been reported to have sustained as much as a billion ringgit losses from 3rd party claims annually. Surprisingly, it is reported that for every ringgit the insurance companies earned, about RM2.67 is paid back in the form of claims.

In such dire situations, what then are insurance companies to do?

This has lead to the situation whereby, of late, insurance companies have been rather selective when offering 3d party insurance policies, especially where commercial vehicles and vehicles that are more than 10 years old are concerned.

In such a situation, can the public at large then blame the insurance companies for the problem we face regarding 3rd party insurance?

Bank Negara has proposed that losses faced by the new industry, which is to be set up soon, be shared by both the government and the insurance industry. But the above has, as always, met with some objections from some quarters of the public.

K. Ragunath, as the Bar Council Chairman, feels the Council, amongst other things, is not agreeable to the RM2 million liability limit which the new scheme proposes. And Bar Council is said also to oppose the launching of the new company TPBIC Newco, to be jointly set up by the government and the insurance industry.

It is said the Bar Council was against using taxpayer’s money, as it tantamount to using what is known as public funds for commercial purposes.

To end this article on 3rd party insurance scheme scheduled to be launched by Bank Negara soon, if the Barisan government in Parliament can get a 2/3 approval from its members of Parliaments, as a member of the Malaysian public, I feel this decision should be accepted after all.

Permit me to quote one of my English language teachers, who once said to us students, “the ends justify the means”. I’m certain all readers of this blog will understand what the above saying implies.

The proposed basic motor cover framework discussion paper, which was issued on the 23rd of April 2010 can be securitized by all members of the public via Bank Negara web site.

I look forward very eagerly to the announcement and quick implementation of the new Third Party Bodily Injuries and Death insurance scheme. Hopefully, with its launching, 3rd party policy purchases, prior to renewal of road taxes will no longer be a headache for owners of old vehicles. And it is certain commercial vehicles owners will also cease to face this annual problem from henceforth.

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