Piam welcomes proposal to limit liability claims

by Habhajan Singh
Persatuan Insurans Am Malaysia (Piam), the association for general insurers operating in Malaysia, welcomed a proposal to limit the liability shouldered by insurance companies for motor insurance claims.
It is timely that the proposal to limit liabilities on third party motor insurance covers be considered seriously in order to ensure the viability and availability of third party insurance protection for vehicle owners, Piam said in a statement released yesterday [May 4, 2009], affirming a position long held by the grouping.
This was in response to a statement by Minister in the Prime Minister's Department Datuk Seri Mohamed Nazri Abdul Aziz on Wednesday.
One newspaper quoted the minister as saying the ministry would look at amending the laws covering motor insurance to resolve the matter. The report said public transport operators have been crying foul as insurance companies no longer want to insure taxis and buses.
Nazri said this was because the insurance companies claimed that they were losing money by insuring commercial vehicles. Nazri, the report added, said that at present operators could sue the insurance company for millions. The amendment would limit the liability shouldered by the insurance companies.
"This way, the vehicle would be insured, the operator would be able to claim during any accident and the insurance company would also be protected," one newspaper quoted the minister.
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 high-risk insurance pool run collectively by the industry under orders from the regulators.
The report also noted that a recent decision by two local insurers to completely stop providing third party cover to commercial vehicles is set to see a higher volume of premium going towards the high-risk insurance pool called the Malaysian Motor Insurance Pool (MMIP), which had already seen a big jump last year.
On June 1, The Malaysian Reserve reported that Pacific & Orient Insurance Co Bhd (P&O Insurance), one of the local top guns in motor insurance, was set to pull out completely from the third party motor insurance segment, following the trend of other insurance providers in Malaysia who have stayed clear of this sector due to the high claims ratio.
The general insurer, a subsidiary of listed Pacific & Orient Bhd (P&O), was second only to Kurnia Insurans (M) Bhd for underwriting third party motor insurance covers in 2008.
In its response, Piam said for most countries in Europe, US and even Asean (except for Singapore, Brunei and Malaysia), the law provides for limited liability for third party risks arising out of the use of motor vehicles.
"In Malaysia, provisions for limiting liability will involve amendments to the Road Transport Act, 1987 and consultations with the Insurance Regulator on suitable amendments to the motor insurance policies to cater for the changes in limits of liability under the policy contract," it said.
Earlier, Piam had announced combined loss ratios of 114% and 115% for motor insurance business in 2007 and 2008 respectively. It said insurers have also expressed their concerns over the rapidly increasing claims pay-outs especially for third party bodily injury claims. Claims ratios for third party bodily injury claims skyrocketed to 262% in 2007 and 288% in 2008, said Piam.

(This story appeared in The Malaysian Reserve on June 5, 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)