Motor Insurance

The coverage available under a Motor insurance policy includes:

Act cover

The ‘Act’cover is the minimum cover required by the Road Traffic Ordinance. It covers death or injury to third party arising from the negligence of the insured in a motor accident. The amount covered under this policy is unlimited. This policy does not cover damages to third party property, damage to or loss of the driver’s vehicle or injuries suffered by the owner.

For example, Shanti crashed into a stationary car parked near her house, hurt herself and damaged the other car. The Act cover will pay for the injuries suffered by the injured person in the parked car. It will not cover the damages to the other car or the damages to her own car and her injuries.

Third party cover

The Third-party cover provides wider cover than the Act cover. It provides coverage for a blending of protection granted by an Act cover and in addition indemnity for liability for damages to property belonging to third parties.

Quoting the above case, if Shanti had bought a Third-party cover instead of an Act cover, it would have covered the cost of the other party’s damages to the vehicle.

Third party, fire and theft cover

This type of Third-party cover is a combination of Act cover, third party cover, and in addition, it indemnifies the insured against theft of his or her vehicle and damages by fire.

If Shanti’s car was stolen three months after the accident, this policy would cover her losses while the former two will not.

Comprehensive 

This is the widest form of cover under motor insurance and is highly recommended. Acar is a major asset of the client and losses sustained in an accident would be substantial even if the loss is not total. The Comprehensive cover would confer a much greater cover to the client.

This plan is a combination of the Act and Third party coverage plus any physical damage to the insured vehicle and its spare parts following accidental collision and other perils as more specifically covered in the policy.. It is also possible to increase the policy’s degree of comprehensiveness by adding other coverage such as windscreen cover and P.A. cover, etc.

With this policy, Shanti would have been able to claim the losses on the repairs made to her damaged car.

Classes of Motor Insurance

The 3 classes of motor insurance under the Motor tariff are:

a)Private motor car

b)Motorcycle

c)Commercial vehicle

Each of the above classes has its own motor insurance policy and is rated separately under its own section of the Motor Tariff.

Sum Assured

The risk amount to the insured of a motor vehicle is reflected in the sum insured. The sum insured of the vehicle is the client’s estimation of the value of the vehicle and its accessories. The value should be reflective of the market value at the time the insurance is bought. Depreciation of the vehicle must be taken into consideration and the value should be reviewed every renewal date. Over insurance will obviously waste the client’s money, while under insurance will subject the claim to the average clause.

Rating 

In accordance with the ICAGIB (Inter-Company Agreement General Insurance Business) ruling, premiums charged must be those stated in the Motor Tariff. This would mean the rates, unless loaded, on each class of vehicle will be the same for all insurers.

Private Motor Car 

Comprehensive premium is calculated based upon:

-sum insured
-the cubic capacity of the car

To arrive at the third party premium it is necessary to know the cubic capacity of the car and reference is then made to the premium chargeable on the third party columns as shown in the Tariff.

Commercial Vehicle 

As there is a wide category of vehicles falling under this class, the exact type of vehicle must be known. Comprehensive premium is calculated based on:

-sum insured
-tonnage
-business permit e.g. A to C to obtain the comprehensive premium

For third party cover, the sum insured need not be known and the same procedure applies as in private car third party insurance.

Motorcycle 

The comprehensive premium is calculated based on:

-the cubic capacity of the vehicle
-the sum insured
-whether for single or all riders or commercial usage

To arrive at the third party premium the sum insured need not be known and the premium calculation
is obtained from the third party column of the tariff.

Minimum Premium 

The minimum premium per policy (whether annual or short period) is RM50.00 for (private cars and commercial vehicles cars) and RM20.00 for (motor cycles) after deducting No Claim Discount but before allowing commission /brokerage.

No Claim Discount 

Written evidence of entitlement or confirmation from previous insurer must be obtained before allowing the No Claim Discount.

No Claim Discount should only be allowed on the basic premium (including the premium charged for any loading imposed). All extra benefits extension shall not be permitted a No Claim Discount.

Under no circumstances can any staff make special arrangement to issue NCD vide credit note with agents. All NCD should be for the benefit of the policyholder and not credited to agents’ account. When requested to issue NCD letters, these letters must be issued in duplicate to the insured and the insurance company will return one duly signed copy of the letter to the policyholder.

Likewise, the new policyholder should obtain NCD letters in duplicate and sign and return one copy of the letter to the previous insurer. This is to allow the industry to check that no forged NCD letters are treated as valid. There have been instances that NCD letters submitted by policyholders are “fakes”.

Extensions to Basic Cover 

i.Windscreen cover may be granted at inception of cover but if the cover is requested during the currency of the Policy, a survey must be conducted before cover can be granted. Additional premium at 15% of windscreen value.

ii.Passengers liability cover can be granted on request by payment of an additional premium of 25% of the premium charged for the third party cover. For cars with seating capacity in excess of 4 passengers, an amount of RM10.00 per passenger after the 4th passenger would be charged

iii.Medical expenses (Section III) and personal accident (Section IV) cover are excluded. However they can be granted on request by payment of additional premium of RM20.00 per person

iv.Strike, riot, civil commotion cover can be granted with additional premium of 0.30% of the sum insured.