Tuesday, June 23, 2009
BNM close to appointing Pos Malaysia as agent
By HABHAJAN SINGH
THE central bank is on the verge of appointing Pos Malaysia Bhd as the agent for motorists to buy motor insurance from the industry pool, now that most insurers have declined to underwrite directly that segment of the insurance market.
It is understood that Pos Malaysia, the national postal services provider which has been in the red for financial years 2007 and 2008, will secure the contract to ensure that motorists are able to secure the third party insurance cover.
In the past few weeks, more and more motorists found themselves turned away by their insurers when they wanted to renew their third party cover. Instead, they were told to shop around at other insurance companies that may still underwrite that segment, but to little avail as most general insurers and takaful operators have stopped underwriting the risk directly due to the segment's high loss experience.
In light of this increasing difficulty, Bank Negara Malaysia (BNM) which regulates the insurance and takaful industry is understood to be turning to Pos Malaysia to act as an agent on behalf of the motor insurance pool, the insurer of the last resort.
As it is, Pos Malayia is already an agent for various general insurers who provide third party motor insurance, including the likes of Kurnia Insurance (M) Bhd and Allianz General Insurance Company (Malaysia) Bhd.
However, under the new proposed arrangement, Pos Malaysia would act as an agent for the Malaysian Motor Insurance Pool (MMIP), a high-risk insurance pool run collectively by the industry under orders from the regulators, and no longer as a direct agent for the insurers themselves.
At present, MMIP, which is a subsidiary of MNRB Holdings Bhd (MNRB), has appointed two insurance companies to act as its agents.
"With more and more insurers declining to underwrite third party motor insurance risk, their only other resort is the insurance pool run under MMIP. It only makes sense for the pool to be more widely accesible, and not limited to just two insurers who may not have branches throughout the country," said one industry executive.
Sources say BNM would be making the announcement on the alternate and new channels for purchasing third party motor insurance soon. Pos Malaysia seems to be the obvious choice simply due to its nationwide presence.
In 2008, the Government resorted to Pos Malaysia to disburse the fuel cash rebate. Pos Malaysia chairman Tan Sri Dr Aseh Che Mat in the company's 2008 annual report statement referred to this as a recognition that "Pos Malaysia has the widest retail footprint in the country."
On May 27, The Malaysian Reserve reported that insurance companies are no longer willing to provide third party motor insurance under their banner, and are instead sending their customers to a highrisk insurance pool.
The report also noted that a recent decision by two local insurers — Kurnia and Pacific & Orient Insurance Co Bhd (P&O Insurance) — to completely stop providing third party cover to commercial vehicles is set to see a higher volume of premiums going towards the insurance pool, which had already seen a big jump last year.
Even before the two local insurers made the decision, the motor insurance pool had collectively underwritten total gross premiums of RM13.33 million, which is four times more than the RM3.11 million in premiums in 2007.
(This story appeared in The Malaysian Reserve on June 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)