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.

Malaysia Car Insurance

In Malaysia, motor insurance is compulsory for all motor vehicle under the Road Transport Act 1987. To prevent the case such as motor vehicle owners not purchase motor insurance, government had implemented the rule that motor vehicle owner need to have motor insurance before they can renew road tax.

There are 3 main types of motor insurance in Malaysia, ranging from the most basic protection to more in-depth assurance to its driver, namely Third Party Cover, Third Party, Fire and Theft Cover, and Comprehensive Cover.

Third Party Cover

 
In the motor insurance terms, the “first party” is you (the driver), the “second party” is the motor insurance company and the “third party” is everyone else. A Third Party Cover is third party car insurance that insures you against any injuries or deaths caused to another person, as well as loss or damage to a third party property caused by your vehicle.

Fundamentally, third party car insurance provides the minimum level of cover to you as required by the law. With third party insurance, you cannot claim for any damages to your own vehicle. Its third party liability means that only third party (not your own vehicle) can claim for damages from your insurer, and you cannot claim for damages to your own vehicle in any accidents, fire damage or stolen.  

Third party insurance is normally offered at a cheaper premium if compared to Comprehensive Cover. Third Party Cover is the minimum level of coverage a motor vehicle owner needs to have in order to renew his/her road tax.

People who look for third party insurance are usually those whose cars are old and have completed car loan repayment. Even though Third Party Cover comes with a cheaper premium, with the nature of older cars tend to cause accidents, it could end up costing more.

The process to buy third party insurance is a bit more complicated, as most car insurance companies prefer to deal with Comprehensive Cover. The main reason is the recent rise in road accidents and claims cost, which had made third party car insurance less profitable for insurance companies. In addition, it is rather difficult to estimate the value of old motor vehicle, which is needed to work out the premium on the insurance. Some car insurance companies do not accept the old cars aged above 15 years, while other insurance companies value the 15 years old and above old cars at RM10,000.

For those who are looking at Third Party Cover, there will have a “loading” which a driver has to bear. The “loading” is an additional amount added to the insurance premium to reflect the additional and higher risk the insurance companies had to bear. Some insurance companies require the driver to get Personal Accident Insurance in order to secure third party insurance.

Third Party, Fire and Theft Cover

Basically, Third Party, Fire and Theft cover is the same as Third Party Cover, with the added car insurance coverage of fire damage and theft to your motor vehicle. Its third party liability is to protects you (the driver) against claims by a third party, be it bodily injuries or death, third party property loss or damage caused by your vehicle and with additional protection to fire damage and theft to your car.

Comprehensive Cover

A Comprehensive Cover provides wider range of protection for both driver and third party. With a Comprehensive Cover, you basically enjoy the same coverage as in a Third Party, Fire and Theft Cover, but with the added car insurance coverage of own motor vehicle damages.
Comprehensive Cover normally only available for motor vehicle that have not exceed 15 years old. It is advisable to get a Comprehensive Cover for your car insurance if your car is expensive, prone to theft or the repair cost tend to be expensive (especially imported cars with less spare parts available and not popular in Malaysia car market), as the more valuable your car is, the more protection value it offers to you.


Stolen car compensation

The standard car insurance practice for stolen motor vehicle or total loss claims is to compensate the policyholder based on the market value of the car at the time of loss (or damage), or the sum agreed in the policy, whichever is lower. However some insurance companies reimburse the policyholder based on an agreed car value specified in advance in an agreement with the policyholder, rather than the normal car market value.

Exclusions that not protected by above 3 types of car insurance policy:

1.      Your own death or bodily injury

2.      Your liability against claims from your passengers

3.      Theft of non-factory fitted vehicle accessories (car stereos, leather seats, sports rims etc)

4.      Consequential loss, depreciation, wear and tear, mechanical or technical breakdown failures or breakages

5.      Loss/damage arising from an act of nature, e.g. flood, landslide

However, you may pay additional premium for your car insurance to cover some of the above exclusions as below:-

Windscreen

Cover the breakage of glass in windscreens, front, rear and side windows. The damaged windscreen will be replaced and your NCD will not be affected. Its premium is normally 15% of insured amount.

Legal Liability To Passengers

This coverage protects the Insured against legal liability to the passenger in the event of a claim.

Legal Liability of Passengers

Covers the legal liability of passengers for acts of negligence.

Strike, Riot & Civil Commotion

Covers the vehicle against damage caused by strike, riot and civil commotion.

No Claims Discount (NCD)

Persatuan Insurans Am Malaysia (PIAM) has an outline rule for car insurance companies about discount on no claim car insurance. If the policy holders do not claim from car insurance companies for first year and subsequently years, they will entitle to No Claim Discount NCD from the first year of 25% to up to 55% in following years as attached NCD image.

This makes a substantial difference to the overall car insurance premium. If you do claim for damage on your own car where the damage was caused by you, you NCD will back to square at 0% and start from beginning. This is car insurance companies intention to encourage people not to claim. If the damage to your vehicle was by a third party, you will not lose your NCD by claiming from the third party car insurance companies. For those who want to replace new car or sell own old car, remember that NCD is attach to vehicle, not the driver. 

Excess

Excess is the amount that you have to pay in the event of a claim. For example, if the excess on a car insurance policy is RM500 and you make a claim of RM1,500, you will need to pay the RM500 and the rest of RM1,000 will be paid by the car insurance companies.

A Compulsory Excess is stipulated by PIAM for incidents in which the driver of the vehicle is:

1. not listed in the Policy Schedule
2. is under 21 years of age
3. is a Provisional license driver or held a full driving license for less than 2 years

Loading  

A loading is an additional charge on your policy that the car insurance companies added to your premium if they need to bear additional risk, including driver age or experience, age of vehicle, claims experience, sport and high performance car, carrying capacity, special vehicles carrying noxious or flammable materials, low loaders, timber/log carriers & petrol tanker.

Motor Insurance

NCD

Road Tax