Consumers Association of Penang

Giving voice to the little people...since 1970

Clear the confusion over motor policy

The Ministry of Finance and Bank Negara Malaysia owes the public an explanation over conflicting reports about the proposed Third Party Bodily Injury and Death Benefits (TPBID) which is going to replace the third-party motor insurance.

On one hand Bank Negara (which comes under the Ministry of Finance) has said that the TPBID policy is not finalized and has invited the public to give its feedback on it. CAP too submitted its comments on 14th May 2010.

On the other hand a recent report in the media quoted an official from the Ministry of Finance saying that the TPBID will be introduced early next year. It further added that the scheme will be jointly run by the Government and the insurance industry.

CAP strongly opposes the implementation of the proposed TPBID as in essence it is no different from the current system whereby compensation for the victim depends on proving fault.  Most of all it is designed to help reduce the losses suffered by insurance companies for third party motor policies.  The call by certain groups to retain the existing system ignores the injustice done to accident victims and is motivated largely by their own group interest. The government should ignore such calls.

In view of the serious weaknesses in the current system and in the proposed TPBID by BNM, the entire fault based system has to go. Instead of wasting precious time, effort and money on determining who is liable and who is not, we should be concentrating on compensation and rehabilitation to all. It is the responsibility of society to assist persons injured from motor vehicle accidents and allow them to be able to return and contribute to society. Our failure to achieve this is also an economic cost to the country.

CAP firmly believes that the introduction of a no fault liability (NFL) system should replace the present system.

In fact no-fault proposals have been made over the years. In 1995, the late Tan Sri Dato’ Harun Hashim, a former Supreme Court judge proposed the introduction of a no-fault scheme for claims in relation to bodily injury and death as a result of motor vehicle accidents. In August 2007, the Attorney General's Chambers issued a Preliminary Issue Paper proposing that a No Fault Liability Scheme (NFL) be introduced. The paper had set out the reasons why NFL was needed and several meetings were held with interested groups. But, regrettably, nothing came out of that proposal.

CAP has already submitted a memorandum on our proposal for a NFL to Bank Negara Our proposal is based on the following guiding principles:
  •  Adequate, efficient and quick compensation for victims of motor vehicle accidents without the need for litigation or dispute resolution on  the issue of fault;
  •  Rehabilitation and life long care for victims with serious injuries and support for dependants of deceased victims;
  •  Effective accident prevention strategies;
  •  Low administrative costs so that more funds are available for road accident victims.
That the NFL scheme is workable here can be seen from the success of our SOCSO scheme which was introduced in 1974 for the welfare of workers.  

Under SOCSO, an injured worker is compensated without having to establish fault.   The SOCSO charter provides that upon receipt of all completed documents and information payment of benefits will be made:-
  •  Within 7 days for Temporary Disablement ;
  •  Within 14 days for Permanent Disablement Benefit, Dependant’s Benefit, Invalidity Pension and  Survivor’s Pension ;
  •  Within 3 days for Funeral Benefit.
SOCSO’s administrative costs are low at 9.15 % of the contribution in 2006 and 9.79% in 2007.  Thus under SOCSO almost 90% of the contribution received is spent for the welfare of the workers.

Compare this to our current system for motor accident vehicles, where 20%  of the premium earned goes to the insurance companies as management expenses and 10 % to the agents as as commission.   Out of the remaining 70%, 30% or more goes to the lawyers leaving only 40% or less available for the victims.  

SOCSO has also taken steps to reduce the number of accidents and as a result of the accident prevention measures taken, the number of accident has declined by 3.4% in 2007.

In the state of Victoria, Australia its highly successful NFL scheme (implemented in the 1980s), has also resulted in a drastic reduction in accidents and claims for compensation.  Fatalities fell from 776 cases in 1989 to 337 cases in 2006 and 290 in 2009.  Over 10 years the number of claims for compensation had fallen by 38,000 resulting in savings of more than AUD 1 billion.

The success of SOCSO means that the NFL scheme is a viable one.  Because of prudent and efficient management, SOCSO’s assets have increased to over RM15 billion

CAP reiterates that it is time for reform of the accident compensation scheme in this country. No-fault is the ideal system that Malaysia should adopt, and it is in fact practiced in many progressive countries.

Malaysia in fact has practiced no fault for almost 40 years in the SOCSO scheme. Human resource and technical support will therefore not be problem, as it is readily available. There is no point in considering other systems. The Government should accept the no-fault system and appoint a high-powered committee to work out and set up the mechanism for the introduction of this scheme in Malaysia.

Press Statement, 18th May 2010