KUCHING: The insurance sector is anticipating in the proposed changes to third party insurance claims that would revamp the whole industry.
VEHICLE COVERAGE: There are plans to limit third party motor insurance claims to RM100,000.
According to RHB Research Institute Sdn Bhd (RHB Research), there are plans afoot to limit third party motor insurance claims to RM100,000 inclusive of hospitalisation, rehabilitation, pain, suffering, loss of income and future earnings.
The ones who decide on the damages would not be judges but a conglomerate of insurance companies that would be drawn from a RM500 million fund contributed partly by the government, the research house pointed out.
It added that an ouster clause prevented adjudication by the courts.
Bank Negara Malaysia (BNM) said the scheme was still at a proposal stage and it would be getting feedback from all stakeholders including consumer associates, the legal fraternity and insurance industry next month before presenting it to the government, the research firm revealed.
RHB Research reported that the new scheme would involve insurers accepting all kinds of motor insurance including third party and comprehensive.
Thereafter, it added that the entire third party premium including the third party cover in comprehensive insurance would be carved out to a pool shared by all insurers.
Unlike the existing Malaysian Motor Insurance Pool (MMIP) where it was the insurer of last resort, the new pool would have all third party coverage, the research firm mentioned.
It suggested insurers would charge a higher premium while at the same time introduce a cap on third party bodily injury and death benefits to ensure that the new pool was profitable or at least broke even.
Comprehensive premium might also be raised partly due to the third party component, RHB Research noted.
However, it added the premium charge for comprehensive coverage might differ from individual to individual given that more factors might be introduced like age, driving habit, area of driving, driving record and type of car to determine the premium instead of the current practice of only using sum insured and cubic capacity of the car.
The research house stated that insurers would only have the profitable comprehensive coverage in their book if the new scheme were implemented.
It added that Kurnia Asia Bhd would benefit the most given its motor heavy portfolio while others would also benefit.
The sector’s growth prospects were improving driven by 4.5 per cent Gross Domestic Product (GDP) growth in 2010, rising public awareness on insurance protections, low penetration rate and further liberalisation on the sector.