The Malaysian Bar Council, which is opposing a Bank Negara initiative to revamp the motor insurance sector, is calling for the central bank to set up a cross-industry working committee to review feedback from all parties before implementing a scheme that would limit the liability of motor insurers to third party claimants to RM2 million.
The move by Bank Negara is in line with the government's aim of ensuring access for motorists to the mandatory third party bodily injury and death insurance coverage that is reportedly a longstanding grouse of motor insurance underwriters. According to reports, citing central bank data, losses from such third party motor policies are estimated at about RM1 billion annually.
Bank Negara was said to be considering the RM2 million cap but had yet to finalise the capping level. Speaking at a media briefing in Kuala Lumpur yesterday, Bar Council president Ragunath Kesavan said the proposals by Bank Negara, which it outlined to the council in a dialogue on Monday (Apr 19), could not be agreed upon by just conducting dialogues with concerned stakeholders.
"There should be proper, true consultations. There has to be a working committee, and not a one-off dialogues, to look at the issues. It seems to be a huge transformation with very little thoughtthrough process, with minimal consultation and it all seems to lead to one direction, profitability of the insurance companies," he said.
Under the scheme being proposed by Bank Negara, a newco would be established to manage the new scheme with the government holding a majority stake in this new entity.
Ragunath said the formation of the newco would be expensive at the onset as there was a need to set up a nationwide infrastructure and network, which would ultimately be paid for by the tax payers.
"What we're saying is to look (and make) use of the current system (in place). The cost of setting up a parallel system will be very high. The solution is to maintain the current system, no caps, and look at where the losses are (occuring) and address those issues.
"If it's inevitable that there is a need to increase premiums, then do it gradually. The tariffs have not been increased since 1978. What has the regulator being doing for the last 30 years? What about periodical reviews? Why hasn't it been done? You don't need a 300% increase in premium, you can do (an annual) 10% increase over the next four years, or look at the comprehensive sector and use it to subsidise the poorer sector," he added.
Asked whether the Bar Council could get Bank Negara to backtrack, Ragunath said, "It's an uphill battle. I don't think it's going to be easy. The only way to resolve this is if there's a public outcry. We need the support of the public otherwise it's an extremely uphill battle."
"We're commited to working with the various indsutry groups, hosting road shows, spoken to members of Parliament and we want to escalate awareness of this issue. We want public participation of this issue. We're committed to ensure that the public interest is protected.
"We can only do what it's right. We will keep pushing and maintain our campaign. It's about time to have transparency in the industry and such issues need to be looked at. We don't this to be a burden to the people. That's the crux of what we're trying to say," he added.
(The Malaysian Reserve, Jan 24, 2010, Page 1)Any source
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