Bank Negara: Make motor insurance payouts quicker, less painful with reforms

KUALA LUMPUR, April 3 — Malaysian motorists could have an easier and quicker process to claim for motor insurance payouts if this is reformed, Bank Negara Malaysia (BNM) has said.

In its Annual Report 2019 released today, BNM — which is focused on promoting a progressive and inclusive financial system — discussed the need to improve the motor claims process.

The central bank acknowledged the difficulties faced by Malaysian motorists when claiming for insurance and takaful payouts after being involved in accidents, noting that motorists usually say that both the opaque claims process and the time taken for the claims to be paid are “major pain points”.

“On average, own damage claims take two months to be paid from the point of notification. Third-party property damage claims often take even longer to be paid.

“For motorists whose incomes and livelihoods depend on access to a properly functioning vehicle, delays in processing a claim can mean significant hardship, and a delay in getting much needed relief,” the bank said in a feature piece in its annual report.

Factors contributing to longer time taken

BNM then explored why it takes so long for such claims to be processed, highlighting that the entire process involves several stages and multiple parties — including the police, loss adjusters, workshops, insurers and takaful operators — with several checks and controls to ensure that only claims with merit are paid.

The checks to ensure that only deserving claims are paid out include the requirement for a police report as an official record of the accident, while loss adjusters play the role of giving a professional assessment of the damage sustained and repair cost estimates submitted by workshop operators to ensure overall reasonableness, the report said.

“Adding to delays are missteps which motorists themselves might make along the claims process. For example, a motorist might not be aware of what needs to be done after experiencing an accident. He may unwittingly engage a tow truck provider or workshop not recognised by his insurer or takaful operator.

“Each stage of the claims process involves some amount of paperwork, and any error or discrepancy in documentation contributes to delays. While these steps serve to establish fault and curb abuse that would lead to escalating motor insurance premiums, they have also contributed to the issue of slow payouts,” the BNM report said.

However, the central bank also recognised that checks and controls in the claims and process are “unavoidable” to ensure only claims of merit are paid by insurers and takaful operators, pointing out that it could otherwise result in motor insurance being too expensive for some Malaysians.

“Without appropriate controls, motor insurance premiums could increase significantly and become unaffordable for segments of the population. As motor insurance is compulsory, this in turn could have broader implications for society and public safety,” it said.

The motor claims process involves several stages, with errors or discrepancy in paperwork at any stage contributing to delays in the claim being paid. — Bank Negara Malaysia's Annual Report 2019 screencap

Three ways to make it less painful, more efficient

In the same annual report, BNM suggested three strategies that could be adopted to make the motor claims process more efficient, including making Malaysian motorists “better equipped” to navigate the claims process.

The central bank noted that it requires insurers and takaful operators to provide motorists with a standardised guide — on appropriate steps to take when involved in an accident — together with their motor policies, with these guides also available on the websites of insurers and takaful operators.

The bank also said that the insurance and takaful industry had in 2013 already came together to establish a helpline — Accident Assist (1300-22-11-88) — to provide round-the-clock roadside assistance, adding that callers to this helpline can also ask about motor insurance coverage and claims procedures.

As for the second strategy proposed, BNM said the insurance and takaful industry “must continue to simplify and rationalise internal processes for managing claims”.

BNM said it is reviewing its existing standards on timelines that insurers and takaful operators should meet when processing claims, with the aim to reduce the time taken by having better information and disclosures.

“In this regard, the Bank backed efforts by the industry to establish a central database on the costs of motor parts and repair times, and to promote consistency in the quality of repairs.

“The Bank also continues to provide a regulatory environment that encourages the industry to adopt digital solutions to further shorten claims turnaround times. For example, the use of video-calls and drone technology allows loss adjusters to inspect damaged vehicles remotely and estimate damages in real-time without needing to be physically present at workshops,” it said.

As for the third strategy, BNM said government agencies involved in overseeing the transportation and motor sectors in Malaysia also have a critical role to play, suggesting that better regulations could make the whole claims process better.

“Effective regulation and enforcement to promote professional conduct and prohibit fraud and abuse are key to protecting the integrity of motor repairs, treatment of injury and the claims process.

“For instance, setting and enforcing clear minimum standards for repairs will elevate the overall level of professionalism of workshops, increase consumer confidence and minimise the scope for disputes during claims settlements,” it said.

Have a rethink?

BNM also went further to suggest that there is room to revamp the entire accident and motor claims process.

As an example, it said that some countries have removed requirements for certain types of motor accidents to be reported to the police and instead require these cases to be reported to designated centres playing the functions as both workshops and as accident reporting centres linked up with insurers.

“These arrangements are supported by industry agreements and legislative changes, which define responsibilities of relevant parties to conduct pre-inspection of the damaged vehicle(s) prior to repairs, and govern the apportionment of liability to the parties involved in an accident.

“An effective dispute resolution mechanism involving independent arbiters to resolve any grievances is also critical. For claimants, this means quicker claims processing, trustworthy repairs, and swift financial relief in the event of injury,” it said.

BNM in the same report said it is committed to promoting a progessive and inclusive financial system that will allocate financial resources effectively and efficiently to meet the needs of Malaysia’s economy and Malaysians, adding that it will continue such efforts this year and focus on various areas including “facilitating sustainable and inclusive growth through structural reforms” in the insurance and takaful sectors.