Prior to the announcement by the Government recently to set up a new company for especially 3rd party vehicles owners to be named Third Party Injuries TPIBD Newco, owners of vehicles 10 years or older was facing much difficulty in securing coverage for their vehicles.

Amongst other things, owners had to succumb to insurance companies who compelled those wishing to secure 3rd party insurance to:

i) Secure at least a RM8000 1st party coverage. With a 50% N.C.B. discount, the premiums alone came to approximately RM248 annually.

ii) Failing to agree to the above proposal, owners had to agree to purchase a RM10,000 Personal Accident (P.A.) policy.

The biggest hassle of all was that insurance agents had first of all to receive green light from the insurance headquarters in Kuala Lumpur before any 3rd or 1st party insurance coverage could be approved.

If readers and vehicle owners feel the setting up of a new company to cater for our woes and difficulties will automatically end our predicament, you are sadly mistaken.

The Consumer Association of Penang (C.A.P.), for instance, is deadly set against the setting up of TPIBD Newco, a new company to be incorporated jointly by the government and insurance companies very soon.

C.A.P.’s president, S.M. Mohd Idris wants the government to set up No Fault Liability (N.F.L.) insurance following the steps of Victoria State, Australia.

C.A.P. believes, under the above N.F.L. scheme, prompt compensation could be paid out to accident victims. There is also the question of lower administration costs involved. All in all, such a scheme will eventually make it affordable to the public.

C.A.P. is also of the opinion that the current system of 3rd party insurance and also 1st party should be maintained. We however have to revamp premiums, which unfortunately have remained unchanged since 1975.

Insurance agents, like my close buddy, Mr. Ah Peng, will obviously not be too happy with the setting up of the new company to be set up by the government soon. Why? His company’s business will be at stake.

So this group of people wants the current system of purchase of 3rd party and new 1st party insurance to remain. It looks as if this group of people are not bothered at all if consumers face difficulties or not, as long as their insurance selling business is guaranteed.

Not all big insurance companies in Malaysia are too happy with the government’s latest proposal too. To them, the whole insurance market today is in an uncertain situation. Especially the motor insurance sector.

If they could, they will wish that the status quo remains. It will then be good for them and bad for the consumers though.

Can the government then solve the problem of compulsory purchasal of 3rd part and 1st insurance for vehicles prior to the issuance of road tax?

One should remember, under the Road Transport Act 1987, road tax cannot be issued prior to 3rd party or 1st party insurance being obtained.

The problem facing consumers today is not insurance premium alone.

More importantly, it involves claims. Repair claims made by vehicles for accidents and injuries is said to have cost the insurance companies huge losses. The government has to think very seriously how it’s going to settle this problem facing it today.

Whatever it is, C.A.P. president, Mohd Idris, has advised the government to ignore calls by certain groups to retain the existing system as they are largely motivated by their own interest.

Finally, should a new insurance company catering for 3rd party as well as 1st party insurance be set up, as announced by the Cabinet recently?

Pertaining this, the Cabinet and the government as a whole should think about it carefully and come up with a good solution! It cannot allow this problem to be prolonged any further. The public has suffered enough!

The proposed new basic motor insurance coverage for third party injuries and deaths involved so many interested parties.

Consumer associations, the public at large and especially drivers of old cars, which normally are covered by 3rd party insurance coverage. The number involved in the above scheme may run into thousands, if not millions of people.

If indeed it’s true so many people are involved in it, why then has Bank Negara chosen then not to consider it fit to consult the interested parties before drafting the proposed scheme?

The new scheme is said to have far reaching effects to the public. As such, there should be proper disclosure by Bank Negara and meaningful discussions and consultations with all parties concerned who are stakeholders.

In a televised interview held recently, the Prime Minister said the above consultation was necessary before Bank Negara, who incidentally are acting on behalf of the government, before a commitment is made to agree to the new policy.

Consumer Association of Penang (C.A.P.) legal adviser, Jesica Binwani, reiterated it looks as if the P.M. was luckily able to grasp what C.A.P and other interested parties have been trying to say all this while.

For those who are still in the dark regarding this new proposal for basic motor insurance for all third party injuries and deaths, under the new scheme, motor vehicle accident victims may only be compensated for injuries.

It is said they will no longer be entitled for other claims such as loss of current and future income. Third party insurance does not only cover drivers of old cars which currently run into the thousands, if not millions of drivers, but it should be borne in mind also, it involves motorcycle riders as well.

Most motorcycle riders are youths, school children, kampung folks and low income factory workers. The impact on this group of people is immense.

Thanks to the Prime Minister, Datuk Seri Najib Tun Razak, the P.M.’s call to Bank Negara, or directive to it if you may, is very timely and may have averted a disaster of colossal magnitude.

The Volkswagen Club of Malaysia alone is reported to have a membership of some 30,000 members. It should be remembered each and every one of them has a vested interest or locus standi in this new basic motor insurance coverage scheme which Bank Negara is attempting to bull doze through.

As responsible citizens, you decide for yourselves if we should allow such irresponsible behavior on the part of Bank Negara to take place.

We sincerely hope with proper consultations and discussions between all parties involved, an acceptable format will eventually be reached. A word of thanks to the Consumer Association of Penang for doing its duty to the general public.

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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