A reader of this blog very recently wrote in lamenting he had to fork out some RM700 for renewal of his road tax and 3rd party insurance.

He further informed us that he owns a 10 year old vehicle. The reader also told us that he only paid some RM500 for the above 2 things last year. A year’s road tax comes to around less than RM100. That’s means insurance charged for the above 10 year’s old vehicle come to about RM600!

Readers can think for yourselves how insurance companies are holding the public to ransom currently. According to the Deputy Finance Minister, Senator Datuk Dr. Awang Adek, told Parliament that the government and Bank Negara is still in the process of deciding on a suitable mechanism to provide protection against 3rd party motor vehicle injuries and deaths (TPID) at a reasonable premium.

Dr. Awang continued, the government is aware of the difficulties faced by some vehicle owners in securing motor insurance protection, especially by vehicles which are more than 10 years old.

Discussion were held as early as April 2010 with a number of interested parties including members of the public and the feedback will be taken into consideration when framing the mechanism of payment, the Minister told Y.B. Amran Abdul Ghani of the PKR Tanah Merah.

Datuk Dr. Awang, further told the House that according to statistics obtained by the insurance services of Malaysia, the frequency of claims for vehicles more than 10 years old was lower than the frequency of claims which were made by vehicles which were less than 10 years. However, the average claims for vehicles more than 10 years are higher though.

For example, in 2009, 3rd party policy average policy claims for motorcycles more than 10 years old come to about RM15,338 compared to RM13,763 for motorcycles which were less than 10 years.

However, the Deputy Finance Minister said, vehicle owners who found difficulties in securing protection for their vehicles could get it from the Malaysian Motor Insurance Pool which was available through 11 Uni-Asia General Insurance Berhad branches or 684 Pos Malaysia branches which are available all throughout the country.

Well, in view of the above information provided by the Deputy Finance Minister, I guess the public cannot complain anymore that the government has not done anything to assist the public.

The public, on the other hand has to be patient and wait for the new 3rd party insurance scheme to be announced very soon in the beginning of the new year in 2011.

What is suggested that readers of this blog bear with is some inconvenience for the time being and pay a higher insurance and road tax for your 10 year old or older vehicles. There is actually nothing much that one can do.

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.