Motor Insurance, Are We Paying Through Our Nose?

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First, to own a car with the pricing that cause us heart attack, now the motor insurance that will leave us in a coma.

This was written by a friend.

I write both as an insurance agent (who is supposed to represent the company) and as a consumer (who also has cars older than 10 years and a few motorcycles in pristine condition!!)

The latest problem where customers of old cars are forced to insure their cars at RM16,000 when the thing is worth less than RM10,000 and in the event of total loss (eg. due to theft) they can expect the maximum market value of RM10,000. See, there is this thing where insurance operates on a principle of indemnity wehere one cannot profit from a loss. So it will take great political will to get insurance companies to change motor policies to an "agreed loss value' policy which I'm sure they won't want. So at the end of the day, it all boils down to allowing a revision of the motor tariff to reflect current risks and allowing third party fire and theft to raise the premium revenue legitimately without fleecing customers. What say you??

And this is his mail to the papers that was not published.

Dear sir,

I read with disappointment our Prime Minister's recent remarks published in the press that those who own old vehicles should if they are unable to purchase third party motor insurance go to the Malaysian Motor Insurance Pool who are deemed to be insurers of the last resort. I am writing this to tell him that he should be fully briefed before he makes statements like that but I'm prepared to allow him the grace of asking us to go to the MMIP for insurance as he probably doesn't have a car over 15 years old and so has no need to look for such coverage himself for even if he did, he surely would have someone else suffer the inconvenience for him.

Mr Prime Minister, in case you are not aware, the insurer of last resort knowing that is who they are adopt a high handed approach to providing coverage to the public. First, there is a loading of premium which is ridiculously high. And then, there is the mandatory inspection of the vehicle to be insured by Puspakom BEFORE cover can be granted. This means that if your road tax expires today, you'll have to locate the nearest Puspakom centre to have your vehicle inspected before you head over to the HRMP office. I am not going to tell you how much this mandatory inspection costs but let you find out yourself. This Mr Prime Minister has to be added into the loading imposed by the insurer which is higher than the maximum loading allowed to be imposed by regular insurers.

I also understand that of late, consumers have been forced to purchase non motor cover to obtain motor cover and the resulting hue and cry has resulted in Bank Negara Malaysia issuing a circular BNM/RH/CIR010-7 and I reproduce a portion of the salient points in this circular for the information of the public:

SHOULD INSURERS BE UNABLE TO OFFER THE MOTOR COVER ON A STAND-ALONE BASIS, VEHICLE OWNERS SHOULD BE INFORMED ON THE EXISTANCE OF THE MALAYSIAN MOTOR INSURANCE POOL (MMIP) WHICH WAS EXTABLISHED TO PROVIDE SUCH COVER. THE VEHICLE OWNER MUST ALSO BE CLEARLY INFORMED ON THE PRICING STRUCTURE OF THE MMIP AND HOW MMIP COVER MAY BE OBTAINED.

BNM ALSO EXPECTS INSURERS AND THEIR AGENTS TO EXCERCISE UNDERWRITING DISCRETION AND NOT ARBITRARILY DECLINE ANY MOTOR INSURANCE RISKS WITHOUT DUE RISK ACCESSMENT. BNM VIEW THE ABOVE MATTER VERY SERIOUSLY AND HENCE, KINDLY ENSURE COMPLIANCE WITH THE REQUIREMENTS AT ALL TIME.

Good show Bank Negara. So can the Sun also help inform the public on the pricing structure of the MMIP and how (inconvenient it is) to purchase such cover? I write this not only as a consumer who owns some old classic vehicles that are not only well maintained but also kept in pristine condition. But I am also an insurance agent whose hands are tied when it comes to issuing motor coverage for myself or my clients because the whole system is now computerised with e-cover, you key in a vehicle year of manufacture in excess of that allowed by your insurer and you will have to deal with the underwriting guidelines. Perhaps the public should be aware that the MMIP 's biggest obligation is to insure busses, taxis and A-Permit lorries whose nature of use makes them higher risks than say an old retiree's Honda C-70 or first generation Proton Saga. Why do you subject us to a loading calculated to keep the motor pool remaining profitable when we are not likely to cause a dent inthe pool even if we were to cause an accident as compared to an express bus or perhaps a goods carrying lorry,

If Bank Negara really views it as 'very serious' then do something instead of mere rhetoric. It is time to review the motor vehicle premium which has not been reviewed for over 20 years! If inflation has gone up, it cannot be that the premiums have not been adjusted. Either we the public have overpaid in the early years or insurers have been using other business premiums to subsidise. I remember fire insurance premiums were reviewed in the early nineties. Why not motor? The Prime Minister who is also Finance Minister must do something. Just say the word and get the fellows to get going. Surely, it cannot be because you don;t have the political will to do what affects Malaysians of all races. If you can't do this, then allow the insurers to increase the loadings by an additional 50% or allow the coverage to be changed from only Third Party to Third Party Fire & Theft. That way, owners of old cars and motorcycles will still save some loading on premium, save on the cost and hassle of the mandatory Puspakom inspection and insurers increase their premium revenue slightly to accomodate the higher risks of paying compensation for death and bodily injuries or property damage. Mr Prime Minister, I know it can be done if you will just say the word. Please do it and delay no longer.

Joseph Josua Yeoh
Penang