Letter to the Editor
Menara Star No 15 Jalan 16/11
46350 Petaling Jaya Selangor
We refer to the article headlined “Motor insurance indemnity concern” published in the VIEWS section of The Star on 30 September 2014. The Persatuan Insurans Am Malaysia (PIAM) and the Malaysian Motor Insurance Pool (MMIP) would like to clarify certain issues highlighted in the article.
Firstly, an insurance policy is a contract/legal agreement between the insurance company and the insured, known as the policyholder. A legally enforceable contract, amongst others, must meet a basic tenet of Legality, i.e. the purpose of a contract must be to accomplish some goal that is legal and not against public policy. The principle of Legality is a universally accepted principle, which is applied (but not spelt out in the contractual terms and conditions) to all contracts and enforced by the courts.
In the case of motor insurance, when a vehicle owner breaches the law, the insurer will not condone such illegal act by paying for his insurance claim. In other words, if a policyholder or his driver contravenes the law, for example, he is not licensed to drive a vehicle or drives under intoxication; then the motor insurance contract will be void.
Secondly, it is incorrect to say that “policyholders are often only notified after an accident that their motor coverage has been rescinded”. It is also unfair to the insurance companies to say they allow policyholders to walk through “minefields” in making claims. The circumstances leading to the rejection of a claim are closely and thoroughly scrutinized. In all instances insurers act in a reasonable manner and fully understand the difficulties faced by the policyholders when they are involved in a road accident. Insurers will honour the claim unless there are very strong grounds to dispute the evidence or circumstances leading to an accident.
Whilst an insurance contract may not be valid due to certain issues, insurers are still required, and will settle any bodily injury claims to third parties in compliance with the Road Transport Act, 1987. Therefore the general public and all road users are still fully protected.
In addition, we wish to inform the public that if they are dissatisfied with a claim settlement, they can seek redress through the Financial Mediation Bureau. Alternatively the public can contact the Complaints Action Bureau administered by PIAM. Details can be obtained from PIAM’s website at www.piam.org.my.
The Malaysian Motor Insurance Tariff has not been revised since 1978. Anomalies and mispricing of risks can arise with the passage of time, changes in risk profiles associated with motor insurance and takaful coverage and the escalating cost of motor accidents. However, whilst there are plans for de-tariffing, we must caution that it is still at the planning stage. If and when that happens it should be noted that premiums will not decrease across-the-board. Utmost consideration and care will be taken to ensure that any changes made are equitable and will not adversely impact the consumer.
The Association would like to stress that Motor Insurance premiums are also governed by the “Permitted Excess and Loading Guidelines” which has not been revised for 23 years. The insurance industry complies strictly to these two regulatory requirements. Therefore, the issue of arbitrary imposition of excess and loading does not arise.
The Malaysian Motor Insurance Pool (MMIP) is currently one of the biggest motor insurance underwriters in the country by default, due to the prevalence of the high-risks vehicles and drivers. In fact MMIP covers are easily accessible by the public through the offices of general insurers, takaful operators and post offices nationwide. The industry has taken on the role to ensure motor insurance cover is easily accessible even for the unprofitable segment of the business.
Since MMIP has to deal with high risk vehicles and vehicles with adverse claims experience, they are governed by an additional set of tariff where their underwriting standard is more stringent and with stricter policy terms and conditions. These terms and conditions are imposed judicially in full compliance with the laws of the country.
Despite all the insinuations of high premiums and strict terms imposed by MMIP, it should be noted that MMIP’s losses have been increasing and now stand at an accumulated loss of RM 734million over the last four years.
With regards to the age restriction of senior drivers, the industry has submitted a proposal to the relevant authorities to review upwards the maximum age of bus drivers from the current 65 years.
We trust that all the above clarification addresses the inaccuracies in the letter which was published in The Star on 30 September 2014.
Chief Executive Officer
Persatuan Insurans Am Malaysia (PIAM)
Kong Shu Yin
Malaysian Motor Insurance Pool (MMIP)