Call to tighten move on car insurance

Need to address glaring issues to ensure effectiveness of Bank Negara directive

PETALING JAYA: While the recent move by Bank Negara to address the issue of over or under insurance of motor vehicles is commendable, there are still glaring issues that need to be resolved to ensure its effectiveness.

Some of these relate to agents, data base for motor vehicles, enforcement, consistency issues and imported used vehicles.

Federation of Malaysian Consumers Associations (Fomca) secretary-general Muhammad Sha'ani Abdullah said insurers and agents should adhere to the central bank's ruling as there was a tendency for non-compliance and this defeated the purpose to have an appropriate market value of motor vehicles.

Besides compliance issue, he felt agents should not be allowed in the first place to even advice consumers on the market value of motor vehicles when selling motor policies.
“Agents in some cases tend to manipulate and hike up premiums for motor policies and this does not reflect the true value of motor vehicles. There should be a consistent database made available to consumers to access the value of their motor vehicles and whatever charges involved should be borne by insurance companies,’’ Federation of Malaysian Consumers Associations (Fomca) secretary-general Muhammad Sha’ani Abdullah told StarBiz.

“Agents in some cases tend to manipulate and hike up premiums for motor policies and this does not reflect the true value of motor vehicles. There should be a consistent database made available to consumers to access the value of their motor vehicles and whatever charges involved should be borne by insurance companies,'' he told StarBiz.

Concurring with Muhammad Sha'ani, Consumer Association of Penang president S.M. Mohamed Idris said there was no need for agents to advise consumers and not allow vehicles to be insured above the market value.

Make it an offence for an agent to sell a policy whose sum insured was above the market value, he said, adding that one need not worry about being under insured as an agent's commission depended on premiums and he would do the utmost best to persuade motorists not to be under insured.
Muhammad Sha’ani: ‘Agents in some cases tend to manipulate and hike up premiums.’

Effective Aug 1, the central bank said insurers, takaful operators and their agents were required to advise consumers before buying or renewing motor insurance of the present market value of the private car, the importance of insuring the motor vehicle at the appropriate market value and the effect of over insurance and under insurance when a claim was made.

It added that the new measure was to ensure consumers were advised accordingly on the appropriate market value of motor vehicles when buying a comprehensive motor insurance cover for private cars.

The advice to consumers on the present market value must be based on the ISM Automobile Business Intelligence System (ISM-ABI system) or any other credible vehicle valuation database, it noted.

Meanwhile, General Insurance Association of Malaysia executive director Lim Chia Fook said the market value reference should be open to the public to assess and verify its credibility.

“Having a vehicle market value reference is a good start. However, the public needs to be mindful of the constraints and limitations of any valuation system. The valuations provided are based on publicly-available information of vehicle values from various sources, including classified advertisements, inputs from used-car dealers and then aggregated, resulting in the valuation as a reference figure.

“If the same reference is used to derive the insured value and settlement of a claim, then we could expect consistency in the valuation of vehicles at time of insurance and at time of claim,” he added.
Lim: ‘Having a vehicle market value reference is a good start.’

Allianz General Insurance Co (M) Bhd CEO Zakri Khir said while the move could avoid unnecessary disputes, there would be some impact on recond vehicles or imported used vehicles where their value might be of vast difference due to foreign specifications and import duties.

He said it was the duty of the insured to inform the agent or insurer when such cases arose to avoid the problem of vehicles being over or under insured.

Takaful Ikhlas Sdn Bhd president and CEO Datuk Syed Moheeb Syed Kamarulzaman, who is also the chairman of the Malaysian Takaful Association, said the ISM database currently did not have full and conclusive information on all makes and models although it was building up this information progressively.

He, however, said the public could call or SMS ISM directly for the information and need not wait for their policy renewal to know the correct values.

Malaysian Insurance and Takaful Brokers Association chairman Alex Low said although there was no significant downside from the central bank's move to further boost transparency, he felt the database should also be available to consumers.