Buletin Takaful

Source: The Star, 21st April 2010

The Government and insurance industry players will jointly set up a new company (newco) to solely undertake the proposed third-party bodily injury and death insurance scheme (TPBID).

Bank Negara financial sector development department director Abdul Rasheed Ghafur said the Finance Ministry would hold a majority stake in the newco and it would be mandatory for motor players to participate in its operations.

There are currently some 30-plus insurers, including takaful players, offering motor insurance in the country.

According to Abdul Rasheed, the newco will be set up upon finalisation by the ministry and after consultation with various stakeholders and relevant parties involved in the scheme. They include consumer groups, transport players and the Bar Council.

“We want to ensure adequate protection for all motorists and members of the public at reasonable prices, and at the same time reduce the time taken for claims and cost of administering the scheme.

“Participating takaful and insurance players will act as agents in collecting premiums, for which the quantum has yet to be decided, and assess claims and determine the appropriate reserves of the premium funds,” he told a press briefing yesterday.

He said the newco would only provide the basic cover of TPBID and not third-party property damage, which would still be handled by existing insurers that could still provide the top-up cover for third-party liability, theft and other related cases. The premiums collected would fund the newco.

If at the end of the day, the newco suffered losses, they would be shared between the Government and industry players based on a formula yet to be determined, Abdul Rasheed said.

A source, who attended Bank Negara’s talk on third-party claims, said he felt the proposed newco would not work as it was a “sort of modification” of the existing scheme.

“It appears that motor insurers will still be involved in the newco in terms of assessing claims and collecting premiums.

“So what is the difference from the present scheme? The whole set-up is still very vague and there is much room for improvement,’’ he told StarBiz.

According to another industry source, the newco set-up was something of an anomaly as generally, the insurance industry was profitable except for the TPBID portfolio.

He felt the set-up would only burden the Government and taxpayers. Furthermore, third-party insurance was not closely monitored compared with comprehensive insurance claims, he added.

On when the proposed TPBID scheme would be set up, Bank Negara corporate communications department director Abu Hassan Alshari Yahaya said there was no rigid timeline, as much depended on the consensus of the relevant stakeholders and the final agreement by the Government.

The central bank yesterday also unveiled the proposed features for the TPBID, covering areas like compensation, legal recourse, settlement and premiums/contributions.

The overall liability limit for TPBID could potentially be up to RM2mil per life or injured person. Abu Hassan said this figure took into account the majority of the public – more than 90% – claiming for such covers.

It also proposed to provide a fixed scale and limit on heads of damages as well as limit legal recourse.

Asked whether claimants could go to court to settle their claims for pains and suffering, Abu Hassan said they could if they met certain criteria which at the moment were still subject to consideration.

The source felt the RM2mil figure did not take into account the total cap for each head of damages.

On the proposed independent dispute resolution body, Abdul Rasheed said it would be set up by the Government and would comprise experts in different areas like ex-judges, lawyers and medical practitioners who were familiar with handling such claims.

On whether there were any parties, including the Bar Council, which wanted the RM2mil limit to be raised further, he said: “So far, when we met with the consumer groups and transport operators, there was no issue on this limit but we will await further feedback from them.

“But the Bar Council did raise some concerns about the limits. From their perspective, what will happen when a motorist knocks into someone and the court rules that he has to pay more than RM2mil; how does the scheme account for this scenario?

“Our explanation is that this is a basic third-party scheme. If a claimant thinks he needs more coverage than the scheme provides, there is the top-up cover in the market if he wants additional protection.”