New Sin Yew said the SIF scheme, being championed by a group of 16 lawyers seeking election to council for the 2025/2026 term, is not feasible.
He was responding to a claim by former Malaysian Bar president Kuthubul Zaman Bukhari that the scheme would see savings of RM12 million annually and a reduction in mandatory annual premium payments from RM1,000 to RM600 per lawyer.
New said the projected premium for 2025 is expected to be about RM1,000 per lawyer, down from RM1,185 levied this year.
He said a RM600 premium would only be enough to pay claims and would not cover the administrative costs of managing the SIF scheme.
“No insurer will offer RM600 per lawyer. To understand these numbers, a simple explanation on loss ratio is required,” he said.
“Assuming an average loss ratio of 60%, it is expected that RM600 out of the RM1,000 would be paid out in claims. Therefore, if someone pledges to lower SIF premiums to RM600, it means the entire sum is paid to claims.
“The loss ratio will then be 100% since it would be RM600 in premiums and the same amount in claims.
“Over time, this would deplete the funds, including the buffer that the Bar Council has collected. It makes no actuarial sense.”
He argued that claims are cyclical, and that no one can guarantee that “bad years” will not recur. New said the loss ratio was 76% in 2014, 92% in 2015, and 76% in 2016, adding that this was when Kuthubul was on the PII committee.
“Just using these numbers, the (suggested) premium of RM600 per lawyer would result in the SIF failing.
“This cannot be a responsible approach and it is not advised by our actuary. Our actuary actually said we should not reduce premiums for at least three years after (implementing) the SIF,” he said.
New said the Bar Council’s own brokers, Marsh, advised the council to commission an actuarial report on the SIF rules, adding that the report was presented during last year’s AGM, at which Kuthubul resigned as the PII chair.
“The report pointed out that the draft SIF rules, as proposed, would expose major governance issues,” he said.
He said the current PII committee is establishing infrastructure for the future and has adopted a scientific and actuarial approach to protect members in the long run.
New said a draft amendment to the Legal Profession Act 1976 allowing for the SIF to be implemented, for which foreign experts’ advice is being sought, is currently in the works. - FMT
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