Why the no-fault-liability scheme is efficient and fair

This reader argues why the no-fault-liability (NFL) scheme is far more superior than liability insurance.

COMMENT

By CY Ming

During the decade between 2007 and 2016, there were 4,424,076 reported road accidents in the country resulting in 67,667 deaths, and many more victims were seriously injured.

The numbers are rising, as there were 521,466 road accidents and 7,152 fatalities last year.

Road safety measures have obviously failed and adding to the misery are the many road accident victims who are not getting compensation because of our archaic system. Those with vested interests are keen to maintain the status quo.

The Consumers’ Association of Penang (CAP) ought to be lauded for being persistent in calling for the introduction of the no-fault-liability (NFL) scheme to replace the compulsory insurance for third party injuries and legal liability to passengers in taxis and buses.

Former Bar Council chairman Kuthubul Zaman Bukhari again objected to CAP’s proposal, stating, “The injured and the next of kin of those who die in road accidents obtain a higher compensation from court awards now.”

While the statement may be true, those receiving compensation are far fewer than those who do not. It is necessary for all concerned to get real and look at what is happening around us.

Under our existing motor insurance, accident victims must sue drivers at fault and usually wait several years to receive compensation awarded by the court. During this period, the injured or families of those killed continue to wait and suffer.

But many people are driving or riding without valid licences, or under the influence of drugs or alcohol. They would be left to settle claims themselves as insurance companies would repudiate cover whenever the terms and conditions of the motor insurance policy are breached.

As many drivers or riders have little money or assets, victims winning paper judgement but not receiving compensation will be devastated. On the other hand, the NFL scheme is similar to personal accident insurance, which pays out claims without the need to establish fault.

While the amount covered may be adequate for only half of the victims, compensations are swiftly paid out, allowing those affected to carry on with their lives, instead of waiting for closure.

Those who think they are worth more could buy their own life and general insurance, as no scheme can be fair to all, but the NFL is much more superior to liability insurance.

According to CAP, the many advantages of the scheme are:

• Public will benefit from lower administrative costs;
• Full protection for all, including hit-and-run victims;
• Prompt compensation to accident victims;
• Prompt medical treatment since NFL guarantees hospital payments;
• Compensation guaranteed by law;
• Court cases reduced, improves court efficiency and saves public money;
• No legal fees;
• Police can concentrate on crimes since no longer burdened by accident cases.

If implemented, general insurance companies and legal firms, including ambulance-chasing lawyers, would lose out. It was no surprise the Malaysian Bar and representatives of the motor insurance industry objected to the NFL scheme when it was first proposed 10 years ago.

General insurance companies have long complained that the motor portfolio has not been profitable for them and clamoured for higher premiums, which were fixed under the Motor Tariff introduced in 1978.

With that being the case, they might as well discontinue with motor insurance if cash flow from motor premiums is not needed to sustain their operations, and allow just one insurer or pool to collect premiums from vehicle owners and pay out claims.

The government, through Socso, could take over, as it is more efficient for one organisation to administer than 20 general insurance companies.

In such a scenario, motor insurance premiums would go down instead of up, as costs would be reduced by cutting off commissions for insurance agencies and legal fees in civil suits.

More importantly, the safety net will be extended to those not covered by Socso or any form of insurance.

If not, we are far from being a caring society if road accident victims or families of those killed are left to fend for themselves.

CY Ming is an FMT reader.