One of the largest insurance sector and coverage is Motor Insurance. This is due to the fact that Motor Insurance is mandatory for all vehicles using Malaysian public roads under the Road Transport Act 1987.
TYPES OF MOTOR INSURANCE COVER
When you buy a motor vehicle, you need to buy a motor insurance policy for use of the vehicle on the road. There are, however, many types of motor insurance policies available. The common types are:-
This is the minimum cover corresponding to the requirements of the Road Transport Act 1987. The cover required is in respect of legal liability for death or bodily injury to third party (excluding passengers). This Policy is hardly ever written by Insurers.
Third Party cover
This policy insures you against claims for bodily injuries or deaths caused to other persons (known as the third party), as well as loss or damage to third party property caused by your vehicle.
Third Party, Fire and Theft cover
This policy provides insurance against claims for third party bodily injury and death, third party property loss or damage, and loss or damage to your own vehicle due to accidental fire or theft.
This policy provides the widest coverage, i.e. third party bodily injury and death, third party property loss or damage and loss or damage to your own vehicle due to accidental fire, theft or an accident.
(Also known as 3rd party Policy)
|Third Party Fire & Theft
(Sometimes known as 2nd party Policy)
(Also known as 1st party Policy)
|Extension Cover/ Optional Benefits to Comprehensive Policy
(Subject to agreement by your Insurers and payment of additional premium)
|Death or injury to other parties||Death or injury to other parties||Death or injury to other parties||Breakage of Windscreen only|
|Damage to other parties’ property||Damage to other parties’ property||Damage to other parties’ property||Damage arising from flood, windstorm, landslide & other natural disasters|
|N/A||Loss/damage to your vehicle caused by Theft or Fire||Loss/damage to your vehicle caused by Theft or Fire||Damage to your vehicle due to Malicious Damage or Riot, Strike & Civil Commotion|
|N/A||N/A||Damage to your vehicle due to accident||Personal Accident and Medical Benefits for driver and/or passengers|
|N/A||N/A||N/A||Liability to Passenger|
|N/A||N/A||N/A||Liability to third party caused by Passenger|
The Sum Insured of your vehicle is an estimated value for charging your insurance premium however it is also the maximum amount for which your vehicle is insured for. The basis of assessing the true worth of your vehicle is its market value at the time of a loss. The market value must be within the Sum Insured. If it is not, you will be considered your own Insurer for the difference.
Some Insurers offer Agreed Value Policies. Under this term, the market value is considered equal to the Agreed Value of the sum insured.
Most policies are subject to an excess clause. An excess is the first amount of a claim for which you will have to pay. Your insurance pays for the amount beyond the excess. The excess clause may apply on repair claims and/or on theft claims. Some insurers will overlook application of the excess if repairs are undertaken at their panel of repairers.
A standard motor insurance will not cover certain losses, such as your own death or bodily injury due to a motor accident, your liability against claims from passengers in your vehicle (except for passengers of hired vehicles such as taxis and buses) and loss or damage arising from an act of nature, such as flood, storm and landslide. However, you may pay additional premiums to extend your policy to cover flood, landslide and landslip as well as cover your passengers. It is important to check your policy for the exclusions.
The Motor policy allows for policyholders to extend cover to include extra benefits and additional cover apart from the standard coverage. Do communicate with your insurers to request for these additional covers.
- Flood, windstorm, rainstorm, typhoon, hurricane, volcanic eruption, earthquake, landslide/landslip, subsidence or sinking of the soil/earth or other convulsion of nature
- Breakage of glass in windscreen or windows
- Strike, riot and civil commotion
- Tuition and testing purposes
- Additional named driver
- All drivers’ extension for private car polices issued to a company of businesses only
- Passenger liability
- Liability of passengers for acts of negligence
- Additional business use
The basic premise of a motor insurance policy is to put the owner in the same condition as he would have been in before an accident occurs. Betterment will apply, when in the course of repairing an accident-damaged vehicle, a new part is used to replace an old part. Betterment is a portion of the cost that consumers will have to bear when the damaged part of the vehicle is replaced with a brand new original part. As the car will be in a better condition prior to the accident the insurance company will require the car owner to bear the difference in costs. This will be based on a scale of betterment adopted by the insurance industry as shown below:
|Age of your vehicle||Rate applied (%)|
|< 5 years old||0|
|10 and above||40|
Consumers have the option to purchase new add-on insurance cover such as “waiver of betterment” or request for second-hand spare parts subject to availability to avoid incurring betterment charges.
The premium payable may be reduced if you have no-claim-discount (NCD) entitlement. NCD is a ‘reward’ scheme for you if no claim was made on your insurance policy on an annual basis. Different NCD rates are applicable for different classes of vehicles. For a private car, the scale of NCD ranges from 25% to 55% as provided in the policy.
HOW TO MAKE A CLAIM
When you are involved in an accident, you may either make an own damage claim or a third party claim if your Policy is under Comprehensive cover :-
Own damage claim
This refers to making a claim on your own insurance policy, i.e. you have a comprehensive policy. However, you will lose your NCD entitlement.
In notifying your insurance company of the accident, enquire about the names of approved workshops to send your vehicle for repair.
Submit the fully completed Motor Accident Report Form together with all supporting documents as soon as possible to your insurance company.
The workshop will commence repairs on your vehicle upon the approval of your insurance company.
Upon completion of repairs, you will be informed by the workshop to collect your vehicle.
Own Damage Knock-for-Knock Claim
There are times when your third party is clearly at fault and has been charged by the police for being the cause of your accident. If you can provide the proof from the police to your Insurer, you can then submit an ‘Own Damage Knock-for-Knock claim’ which is the almost the same as an own Damage claim except for the fact that your NCD entitlement will not be affected.
Third Party claim
You may make a third party claim if you are not the party at fault in the accident and you can retain your NCD entitlement.
There are two ways of making a third party claim, i.e. submit the claim directly to the insurance company of the party at fault or, if you have a comprehensive policy, submit the claim to your insurance company. You are encouraged to submit your claim to your own insurance company for speedier claims processing.
As the third party claimant, you are required to mitigate your loss i.e. you must act to minimize your loss.
Appoint a licensed adjuster to assess the loss. The workshop or the third party insurance company may advise you on this.
Submit the adjuster’s report and the fully completed Motor Accident Report Form together with all supporting documents as soon as possible.
You are eligible to claim from the third party insurance company for `compensation for actual repair time’ (CART) and compensation of excess. For the actual repair time of your vehicle, this is based on the adjuster’s recommendation on the number of days required for your car to be repaired. Insurance companies, at their own discretion, may allow an additional seven working days for any unforeseen or unavoidable delay. A standard scale of daily CART has been specified by the PIAM as follows:–
|Private Use Vehicles||CART/Day|
|Up to 1500 cc||RM 30|
|Above 1500 cc – 2000 cc||RM 40|
|Above 2000 cc||RM 50|
|Up to 1 ton||RM 40|
|Above 1 ton – 2 tons||RM 60|
|Above 2 tons||RM 90|
|Trailer Lorries||RM 120|
|Buses (Private)||RM 90|
|Other Buses (Stage/Express)||RM 180|
|Taxi / Hire and Drive||RM 40|
|Up to 250 cc||RM 10|
|Above 250 cc||RM 15|
Alternatively, you may also claim the cost of hiring a replacement vehicle of equivalent type and capacity for the recommended number of days of actual repair time as evidenced by a receipt from a licensed car rental company.
After submission of the claim form, you must cooperate fully with your insurance company or its representative during the course of investigation of the theft claim.
In view that the police and your insurance company will require time to investigate your claim, you should receive the offer of settlement from your insurance company normally within six months from your theft notification or upon completion of the police investigations into your theft, whichever is earlier.
If your vehicle is recovered before your claim is settled, you may withdraw your claim if the vehicle is in good condition. If it is damaged, you may convert your claim into a repair claim instead. If it is seriously damaged, you may be offered a “total loss” settlement instead.
In the event the police has charged the thief and your vehicle is produced as an exhibit, you may be called to court to identify your vehicle during trial.
Some of the information more specific to Motorcycle Policy is highlighted below to clarify and assist in its better understanding.
1.HOW MUCH SHOULD I INSURE MY MOTORCYCLE?
It is essential that your motorcycle is adequately insured as it will affect the amount you can claim in the event of loss/damage. The Sum Insured should always be based on the market value of the motorcycle at the time of applying for the insurance policy. For a new motorcycle, its market value will be its purchase price. However, there may be some confusion as to what constitutes the purchase price. Essentially, we need to differentiate between the purchase price of the motorcycle and the ultimate “on-the-road” price paid by the buyer. Generally, “on-the-road” price includes, on top of the cost of the motorcycle, other charges such as vehicle registration fee, road tax, insurance premium, legal, stamp duty and handling fees for financing, etc. As can be seen, the other charges are not directly related to the cost of the motorcycle. Only the actual cost of the motorcycle, i.e. the purchase price directly related to the motorcycle should be used as the basis to determine the sum insured.
2.HOW MUCH SHOULD I INSURE MY MOTORCYCLE?
- Insurance premium should be paid in the name of the insurance company.
- You should always insist on a receipt for the premium paid right away.
- You should also at the same time be given the basic details of the insurance you purchased in the form of a confirmation of cover slip and it is your responsibility to verify that the details of insurance are correct.
- You should also receive your insurance policy contract within one month. Please read the policy carefully. If you have any queries or doubts, please seek clarification from the agent or insurer immediately.
3. WHAT IS THE DIFFERENCE BETWEEN A SINGLE RIDER AND AN ALL RIDERS MOTORCYCLE POLICY?
A “Single Rider” Motorcycle Policy allows only the insured or a named person to ride the motorcycle, whereas an “All Riders” Motorcycle Policy allows any other persons who is authorized by the insured, in addition to the insured, to ride the motorcycle. In view of the extended coverage, there is a 50% additional premium to the “All Riders” Motorcycle Policy. There is always the contention by the policyholders that they can control who uses the motorcycle and, therefore, should not be required to buy what is perceived to be the more expensive “All Riders” cover. However, we can all acknowledge that, in reality it is not always possible or practicable to control the use of a motorcycle. In fact, many a time when an accident occurs, it was invariably someone else other than the insured or named person who is riding the motorcycle. Under such circumstances, a “Single Rider” Motorcycle Policy will not pay for the loss.
When that happens, it may be argued that, that is a risk taken by the policyholder who chooses not to take up an “All Riders” Motorcycle Policy. But we need to bear in mind that the interests of others must be taken into consideration such as members of the public who may end up not being compensated for damages arising from the fault of the unauthorized riders or that of the financier of the motorcycle in case of theft or total loss of the motorcycle concerned. It is, therefore, always strongly recommended by insurers that their customers take up an “All Riders” Motorcycle Policy.
4.WHY DID MY INSURER PAY MY CLAIM TO THE CREDIT/LEASING/HIRE PURCHASE COMPANY WHEN THE PREMIUM IS PAID BY ME (THE INSURED)?
We need to realize first of all that before any financier extends a loan to purchase a motorcycle, he will ensure, amongst other things, that he has some form of guarantee or collateral to protect his interests. As such when a credit/leasing/hire purchase company, who may also be the motorcycle dealer who sold the motorcycle to the policyholder, grants financing for the motorcycle, he will demand certain financial protection. This includes the benefits that may be derived from the insurance policy, although it is paid for by the policyholder, In fact, the credit/leasing/hire purchase company has the right under the financing agreement to have their name endorsed in the motorcycle policy as owner of the motorcycle.
As such, under the Motorcycle Policy, the credit/leasing/hire purchase company, as the owner of the motorcycle has first right to compensation by the insurance company for loss (that is not made good by repair, reinstatement or replacement) to the insured motorcycle.