I was surfing around and came across some interesting proposals reported by the Sun on the 15th of April 2010 about the proposed change for motor insurance claims in Malaysia. Among the interesting proposals include limited legal recourse, limiting claims to RM2.0 million and the setting up of an independent dispute arbitration body. The first thing on Barista's mind was on the consequences of such changes. (Source : http://www.sun2surf.com/article.cfm?id=45609)
RM2.0 million limit to claims
A limit of RM2.0 million may appear to be sufficiently high for the majority. However, the question to be posed is, 'How often do judges award damages for Pain and Suffering and Loss of Amenity ("PSLA") for more than RM2.0 million in Malaysia?'. This is normally awarded in very deserving cases. The claim is normally made for medical expenses and other costs incurred as a result of the accident. This include the days where the victim was put off work or loss of future income due to a disability (claim for bodily injuries) caused due to the accident.
There may be circumstances where this limitation would give rise to injustice. As an example, Robert is 23. He is a very bright young man who had spent 6 years after his Fifth Form pursuing his dreams to become an Architect. He has just graduated with a Bachelor of Architecture and was excited to receive an invitation for his first interview as a graduate architect. However, he realised that he needed a suitable attire for the interview. Thereafter, he went to town. As he was crossing the road at a pedestrian crossing when the light was green, a car driven by a driver who was speeding and talking on the mobile phone was closing in on him. The car then hit Robert at such a speed that would leave him incapacitated.
He would have earned very well in his lifetime but for him being involved in a very serious road accident through no fault of his own which left him in a permanent vegetative state. He will require continuous medical care or treatment throughout the rest of his life. The cost of medical care may well go into the area of about RM200,000.00 a year. Considering inflation every year and increasing cost of medication, a successful claim of RM2.0 million will not even cover a full 10 years. Where will he then turn to as a result of this limit? If he is in his 20s, he will not be able to seek further medical assistance into his 40s. The disability may prevent him from working. Does this mean that despite the existence of compulsory motor insurance that was designed to protect other 3rd party road users, such as Robert, the new proposal will effectively discriminate against those whose cost of medical needs exceed RM2.0 million?
Robert lost more than just the cost of his medical needs. He could no longer work as an Architect due to his disability. The money spent by his parents for his education to be an architect was lost. He will not be able to claim the loss of his future income as he was not working at the time of accident (See Dirkje Pieternella Halma v. Mohd. Noor Baharom & Ors [1990] 1 CLJ 99 (Rep) and Section 28A(2) of the Civil Law Act 1956). Is this the direction that we want 3rd party motor insurance claims to head towards? We may not realise the consequences today but if we are to unfortunately be in the position of Robert in future, we will then question ourselves, why did we not question such a proposal in 2010 when it was proposed.
In Hungary, the limit is set at €4.5M (roughly about RM19.8 million) for personal injury and €1.8 million (roughly about RM7.9 million) for property damage. In the UK, there is a limit of £1.0 million (roughly about RM5.0 million) for damage caused to property. This is provided under Section 145 of the Road Traffic Act 1988 (UK). It should be noted that there appears not to be a limit in the UK for compensation for death or bodily injuries like the one proposed in Malaysia.
The statutory limit that is proposed by Bank Negara Malaysia at RM2.0 million generally is too low for compensation for death or bodily injuries. It may be justifed for property damage but as regards death or bodily injuries, the limit should be higher if not retain the current limit, which is unlimited.
Limited legal recourse and the setting up of an independent dispute arbitration body
The reasoning given for such a proposal is usually the issue of time spent through the civil litigation process being too long. Does this justify taking cases involving road traffic accident claims from the Courts and compel such cases to be tried in an arbitration? If this is the case, it would be best if we take every areas of dispute from the Courts. We should compel those involved in commercial disputes to go for Commercial Dispute Arbitration, property disputes to go for Property Dispute Arbitration, etc. At the end of the day, the civil litigation process will be very efficient.
Instead of proposing to set up a new body to hear such disputes due to complaints that the claim through courts is slow, a review on procedures to improve efficiency of the courts service would be a suitable approach. When there is a problem, it appears that people prefers evasion rather than addressing the problem directly. However, the problem with evasion is that they tend to create something new as an alternative (such as a new independent dispute arbitration body). Without the benefit of hindsight, this may lead to further problems in future (such as issues arising from the addition of Art. 121A of the Federal Constitution on a conflict of jurisdiction between Civil Law and Syariah Law and the amendment of Art. 121 of the Federal Constitution on the judicial powers of the Federation of Malaysia).
Conclusion
The limit on the amount that may be claimed for 3rd party motor claims should be increased for death and bodily injuries. Although a cap of Rm2.0 million would affect a minority of claimants, the injustice towards them are serious enough to justify a reconsidering of such a proposal. There should also not be an alternative dispute arbitration as cases in motor accidents are normally straightforward and capable of being settled through summary judgments. However, for the more complex cases, it should be left with the current civil litigation process and not by creating a new body without considering the reason why the current civil litigation process is too slow.
Update: 20.4.2010
Further to the post on 16th April 2010, there has been an official announcement by Bank Negara Malaysia as reported in The Star. (http://thestar.com.my/news/story.asp?file=/2010/4/20/nation/20100420184728&sec=nation)
It was said that the "...proposed basic coverage would be provided by a company jointly owned by the Government and the industry, and the insurance companies and takaful operators would act as agents."
The next question is, how do we calculate the percentage of ownership in this new company. Assuming that the Government will be taking a majority share, how do we calculate the remaining percentage of ownership? Who is considered or deemed to be in the industry? Are they represented by General Insurance Association of Malaysia, the National Insurance Association of Malaysia, etc? If more than one association or body exist to represent those in the industry, how do we calculate their share in the new company?
These are all preliminary questions and without the benefit of reading the full proposal, it is too early to be making assumptions on the new company.
However, my main concern is whether this proposal is proportionate to the Government's policy in ensuring access for motorists to the mandatory Third Party Bodily Injury and Death insurance coverage? I agree that access is important and any proposal to ensure that the coverage is available to the masses should be encouraged. However, restructuring the entire motor insurance scheme may be an overkill.
