MyCC's Proposed Decision Against PIAM and its 22 MembersRef No : 03/17/01 01 Mar 2017 Embargo : For immediate release
This is in response to media queries on the proposed decision by MyCC (Malaysia Competition Commission) against Persatuan Insurans Am Malaysia (PIAM) and its 22 members regarding the arrangement on the agreed discount rate for motor parts prices and labour rate for repairs of motor vehicles involved in an accident.
The proposed decision is most unfortunate as it will severely impact consumer interest. Public benefit is served by the arrangement that was mutually agreed on between PIAM and the Federation of Automobile Workshop Owners' Association of Malaysia (FAWOAM):
The arrangement was put in place in response to a clear directive from Bank Negara Malaysia to the general insurers in 2011 to address disputes between workshops and general insurance companies over insurance claims payments for motor repairs. Such disputes had given rise to protracted delays in repairs and caused significant inconvenience to consumers. Complaints were also received by the Bank on unsatisfactory and high costs of repairs. The Bank had received more than 500 complaints of this nature in 2011 alone prior to the arrangement. Such complaints have now been reduced by 50%.
- The arrangement was necessary to reflect reasonable costs of repairs in an environment where motor insurance premiums are regulated by a tariff. Inflated claims, if not effectively controlled, would have necessitated significant adjustments to the tariff premiums affecting all consumers, or risked general insurance companies withdrawing altogether from the motor insurance market. This occurred in 2012 in relation to motor third party bodily injury claims, when more than one million motor vehicles were referred to the motor insurance pool for declined risks due to difficulties faced by consumers to secure motor insurance at the prevailing tariff rates. The Bank subsequently sought and obtained the Government's approval to implement staggered and limited incremental revisions to the tariff. The tariff still remains in place today.
As announced by the Bank in 2016, measures are currently being taken by the Bank to implement broad reforms in the motor insurance market, which includes the gradual liberalisation of the motor insurance tariffs. This aims to promote a more competitive motor insurance market, while ensuring affordable motor insurance premiums in the long term. Without appropriate arrangements to control inflated and fraudulent claims which are being addressed as part of the reforms, these objectives will be severely undermined.
Bank Negara Malaysia firmly believes that public interest is best served by continued progress on the reforms in the motor insurance market. Any decision to review the arrangement independently of these reforms without taking into account consumers' interest would prevent the public from enjoying timely settlement of motor insurance claims at reasonable cost and affect confidence in the quality of repair work. The Bank will continue to pursue a resolution of this matter in the best interest of the general public.
Bank Negara Malaysia
01 Mar 2017
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