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  Outcome of Public Consultation on Proposed Third Party Motor Cover Framework
  Bank Negara Malaysia, together with the Ministry of Finance, completed initial consultation sessions on the proposed third party motor cover framework with key stakeholders in April 2010 and a consultation paper - explaining the rationale for proposing a basic scheme, guiding principles, objectives and broad features under consideration - was posted on BNM’s website for members of the public to provide their feedback on the scheme.

As at end-May 2010, a total of 125 respondents had submitted their feedback via email, memoranda or letters to editors of national newspapers. Feedback was received from members of the public, consumer, transport, and business associations, political parties, Members of Parliament, the Bar Council and lawyers, insurers and insurance agents.

Several issues were highlighted in the feedback received. The majority of respondents concurred that the priority of the reforms to the insurance system in relation to the third party motor cover framework should be on addressing issues of the delays in the motor insurance claims settlement process. The majority were also open to the need for gradual adjustments to the motor insurance premiums to address price misalignments and to the possibility of moving to a risk-based pricing system. There was agreement that this move would encourage safe and responsible driving, as well as ensure the availability of motor insurance coverage in the long term, while spurring competitiveness and increased efficiency among general insurers and takaful operators.

Most respondents also raised concerns on the expected cost to the Government in setting-up a new entity to oversee and manage the new scheme. On the proposal to cap third party bodily injury and death claims, some respondents were in favour of the imposition of reasonable caps on overall claims, while certain segments felt that restricting the rights to, as well as having limits on the amount of compensation, could result in accident victims being insufficiently compensated.

The possibility of adopting a No-Fault-Liability system to replace the existing system as a more equitable approach in ensuring accident victims are promptly compensated has also been raised by some respondents. While those in favour of such a scheme consider it as a solution to the current inefficiencies, others have voiced objections that this may not be a practical system for Malaysia and may not provide sufficient compensation.

Bank Negara Malaysia would like to thank all parties who have contributed their views and opinions. All the feedback are being taken into consideration and further engagement with stakeholders will be undertaken to provide a holistic solution that ensures adequate protection to motorists and road users at reasonable premiums.

The review will therefore involve: resolving the issues on the appropriate overall limit of compensation; enhancing the existing court system to resolve disputes; phasing-in of additional measures to enhance the efficiency in the overall claims settlement process; and instituting gradual premium adjustments over time to reflect the cost of insurance. The infrastructure to support the framework will also be further reviewed to minimise the costs to the Government. This review will take into consideration the constructive feedback that has been received.

In addition, extensive efforts will be undertaken towards significantly improving the overall claims settlement process. This would require the full support of all relevant stakeholders. The final proposal on a new framework for Third Party motor insurance coverage is expected to be submitted to the Government for consideration in December 2010.

Bank Negara Malaysia
8 July 2010

Additional Information for Media:

Summary of Proposed Basic Motor Cover Scheme for Public Feedback in May 2010

The proposed options for the TPBID Scheme are based on the following four guiding principles, which are, to ensure accessibility of basic protection to motorists, provide basic protection at reasonable premiums, continued availability of voluntary cover on top of basic protection, and faster settlement of claims.

As a basic Scheme, one of the proposed features is for liability under the Scheme to be capped so that compensation paid  would be limited  to, for example, RM2 million per injured person/life. This may also be subject to sub-limits based on the respective heads of damages, such as, personal injury, nursing care and loss of earnings.

Two options have been tabled for feedback from key stakeholders. Scenario A proposes a fixed compensation scale with limited access to courts. Under this scenario, it is proposed that there is to be no premium increase and speedier claims settlement. Scenario B proposes ranged compensation with full access to courts as per the current system, which would involve a reasonable premium increase.
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