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.

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!

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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Only July 7th 2009, the Star newspaper announced a new tariff for 3rd party insurance is being drawn following insurance companies refusal to offer coverage to vehicles that are more than 10 years old.

When the government announced its intention to do away with its decision to scrap its policy of making it compulsory for 15 years old vehicles to be inspected by the Puspakom authorities, many owners accepted it gleefully.

They thought that their woes and troubles were over at long last. How wrong they were.

Permit me to quote Deputy Finance Minister Datuk Chor Chee Heung, who was reported to have said, “Bank Negara was reviewing the rate to come up with a premium that was acceptable to all”.

It is now 5th April 2010. Does it take the authorities such a long time to arrive at a decision such as the above?

True, insurance firms are not willing to offer 3rd party insurance. The rate has remained the same for more than 30 years. Whatever it is, it baffles one that a review of the above rates should take 9 months!

Since then, owners of old vehicles which are 10 years or older, have been subjected to ransom by the insurance companies.

Just recently, myself, upon wanting to renew my wife’s Proton Iswara which is more than 10 years old, found it extremely difficult to obtain 3rd party coverage for it.

The insurance agent, from whom I have been obtaining my insurance for many years, surprisingly informed me permission had first to be obtained from the insurance’s head office in Kuala Lumpur, before they are permitted to cover any vehicle.

An in all, this year’s 3rd party coverage increased by RM40. After a 55% Non Claim Bonus (N.C.B.) deduction, the amount came to a staggering RM240. I still owe my insurance agent this amount up to today.

Upon going to renew my road tax at the general post office, my inquiry from the lady clerks provided me the answer that they do provide 3rd party insurance also. And their rates, calculations and conditions are as stipulated below:

i) Coverage only for vehicle less than 15 years.

ii) Only for vehicles which has an N.C.B. discount of 55%.

iii) Minimum coverage of RM8,000.

The total cost, the lady clerk at the post office told me came to approximately RM200.

Should you weigh carefully the rates offered by my insurance agent and the post office, there exists a discrepancy of RM40!

Besides the differences in 3rd party motor insurance payment, Mr. Chor, the Deputy Finance Minister said the government is aware of many complaints lodged by motorists who are unhappy that insurance companies forced them to buy additional personal accident packages if they want to buy 3rd party schemes.

And even before the new proposal for 3rd party insurance can be announced, the second Finance Minister Datuk Ahmad Husni Hanadzlah announced that Bank Negara was studying the formation of a special company to oversee the new scheme.

Besides that, the proposals that Bank Negara is currently taking into considerations which limits 3rd party insurance claims to a sum of RM100,000, irregardless of the condition of the road accident victims who are involved in accidents.

Presently payout amount by insurance companies depend on court cases which takes into consideration liability, how badly a victim is injured, the victim’s current and future earnings and the cost of looking after an accident victim.

By limiting the amount to a sum of RM100,000 tantamount to a “sell out of public interest” to insurance companies.

It should also be remembered that those who suffer serious injuries are mostly motorcyclists. They are mostly from the lower income group and are mostly youths and students.

It is therefore pertinent for Bank Negara when considering these new proposals, Bank Negara should first of all seek the public’s opinion before making such an important decision.

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The Question Of Car Insurance

A contractor, before digging up the road to lay cables, must first purchase “public liability insurance“. Likewise, although many are unaware, a car should possess insurance, either be it 3rd Party or comprehensive (1st Party).

Without insurance, the “road tax” simply cannot be issued.

Failure to provide insurance contravenes Section 90 (1) of the Road Transport Ordinance ’87. In case you wish to know, you could

1) Be fined up to RM1000.

2) Jailed for 3 months or both

3) Your license can be suspended for 12 months.

Recently in Malaysia, there was a “hue and cry” over 3rd party insurance problem from old cars more than 10 years old.

The problem now appears to be solved. Bank Negara it seems is reviewing the rate to come up with a “premium” acceptable to all.

For readers who know nothing much about “car insurance” it’s simple this. New cars, mostly under Hire Purchase (H.P.) ideally need 1st party insurance.

Should the above vehicle be stolen or involved in an accident, the insurance company is liable to “pay for it” or “compensate” the loss.

Should your car be involved in an accident, you should be able to claim for your repairs from your insurance company.

Likewise, if another party or “person” in involved in an accident with your car, then the other person can also make claims against your insurance company.

Besides all of the above, 1st party insurance also cover:

1) Breakage of front and rear windscreens.

2) All other glass panels (windows, quarter mirrors etc).

However, some insurance company covers only Item 1 alone. Others cover both Item 1 and 2 above. Find out yourself what your insurance company provides you.

Obviously, 1st party insurance is much more expensive. If you wish to know how your 1st party is calculated, here goes.

Car insurance required, say RM50,000. The first RM1000 is calculated at RM252 approximately.

The balance (of thousands) is approximately RM26 per thousand. No problem I hope.

Third party insurance is slightly less expensive, maybe currently in the range of RM100.

To end this short article, remember though you’re entitled to a N.C.B. (No Claims Bonus) yearly. If you make no claims against your insurance company.

N.C.B. rates of discount are for cars:

So, ladies and gentlemen, take out your calculators and do your own calculations!

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Related web pages:

1) Private Car Insurance Calculator

2) Bad Experience of Car Insurance Claim

1st Party, 3rd Party and All Riders Policy

To get your road tax, you require “motor insurance”. A vehicle without insurance, contravenes Section 90 (1) of the Road Traffic Ordinance ’87.

Basically, there are 3 types of insurance: 1st party, 3rd Party and All Riders’ Policy for motors.

Old cars normally use 3rd Party insurance. Previously, motorcycles normally use 3rd Party insurance too. But today, motorcycles are required to have “All Rider’s Policy”.

The geographical areas covered by insurance include Malaysia, neighboring Singapore and Thailand.

What does the insurance policy cover?

1st Party or “comprehensive” cover includes:

1) Loss of theft

2) Damage to one’s vehicle.

3) Damage to the party involved in an accident with your vehicle.

4) Breakage of windscreen – front and rear.

5) Breakage of all glass panels.

6) Injuries suffered by pedestrian, cyclists, motorcyclist etc.

However, it should be borne in mind, that 3rd Party insurance does not cover “loss” or “theft”. The rate of the 3rd Party is much cheaper than that of the 1st Party.

In insurance, there’s something knows as “excess”. Say for instance your insurance carry an excess fee of RM300. This means, when making a claim for say RM500, you’ll only be paid RM200 minus the excess fee of RM300.

What exactly is N.C.B. or No Claim Bonus? N.C.B. is a form of discount paid to the buyer. The highest of N.C.B. is 55%.

When you meet an accident with another car, always try to get the insurance particulars. With the above particulars, you could then go to the J.P.J. or hand them your lawyers.

They could then go to the authorities to secure they particulars they want.

Can 3rd Party insurance be converted into 1st Party insurance? The answer is Yes.

N.C.B. from one Party (3r Party) can then be converted to the 1st Party.

What do we do should one meet with an accident?

We should make a Police Report and secondly, do inform your insurance company too.

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Not having enough car insurance can be the difference between financial stability and financial ruin. Legally, the most important coverage you can carry on your car insurance policy is liability.

Unfortunately, in terms of consumer understanding, many people can’t quite grasp the concept of what this coverage is and how important it can be.

The main concern of many people is making sure their own injuries are covered and that their own car will be repaired if there’s an accident; however, liability is the coverage that will pay for someone else’s bodily injury and/or property damage in an accident if you’re responsible.

Trying to determine how much liability car insurance you should have can be a daunting task. For a start, it is important to know the minimum requirement of the liability car insurance in the state you are in as each state has its own minimum requirement.

Also, you need to understand that car liability insurance protects only the other person, his or her car and their personal belongings.

It does not cover you or your property as a driver and vehicle owner.

So how much liability auto insurance should you buy? Any good insurance agent will tell you that you should buy as much as you can afford and, while this is a good rule of thumb, it does not really get you any closer to an educated decision.

Once you have determined the minimum for your state, there are two things that should be taken into consideration in order to make that decision.

First, what does the minimum cover?

And, second, what other coverage is available and can you afford it?

Car insurance liability packages are shown as three numbers. The first two numbers refer to Bodily Injury Liability Limits. For example, 20/40 means coverage up to $20,000 for each person injured in an accident, up to a maximum of $40,000 for the entire accident.

The third number (as in 20/40/10) would indicate $10,000 worth of coverage for property damage. Property Damage Liability covers you if your car damages someone else’s property.

Usually it is their car, but it could also be a fence, a house or any other property damaged in an accident. It also provides you with legal defense if another party files a lawsuit against you.

That is why it is a good idea to purchase enough of this insurance to cover the amount of damage your car might do to another vehicle or object.

Once you have determined how much liability protection you need to get based on your state’s minimum requirements, it’s always a good idea to ask how much more it is for the next level higher. Very often, you can get significantly more coverage for very little additional cost.

However, if you don’t have that much cash, you can skimp on other kinds of auto coverage, such as damage to the car itself, and apply that savings toward injury liability coverage. After all, isn’t it better to worry more about the passengers and less about the cars?

Article contributed by NetQuote