HISTORY & DEVELOPMENT OF

MOTOR INSURANCE IN MALAYSIA

MOHD FAIZOL RIZAL BIN MOHD RASID

Faculty of Business and Management
Universiti Teknologi MARA, Campus Puncak Alam
LEARNING OUTCOMES
After completing this chapter, you should be able to:

• Explain the history and development of Motor Insurance in Malaysia.

• Discuss the legislations which affect Motor Insurance in Malaysia.

• Describe the roles of the Motor Insurance Bureau (MIB) in Malaysia.

• Explain the history of Motor Tariff 1978 in Malaysia.

• Discuss the provisions of Cash Before Cover (CBC).

VEHICLE ENACTMENT 1899
• The 1st enactment of Road Transport Act in Malaya.
• Relates to non-motorized operated vehicle such as horse-drawn carriages,
tricycles, and chariots.

HORSE-DRAWN CARRIAGE TRICYCLE CHARIOT

TRACTION ENGINES AND MOTOR CARS (TEMC)
ENACTMENT 1912
• The increasing number of motor vehicles led to the introduction of the TEMC
1912.
• This enactment covers the engine and the motorized car as well as the road
regulations in the Federal Malay States.

TRACTION ENGINES MOTORIZED CARS

OBJECTIVES OF TEMC ENACTMENT 1912
• To change the mentality of road driver / user (s).

• To reduce the rate of road accident and fatalities.

• To create awareness and change driving habits.

• Protection of 3rd parties against risks arising from

motorized vehicles.
TRAFFIC REGULATION ORDINANCE (TRO) 1935

• This ordinance was introduced to replace

the Traction Engines and Motor Cars
Enactment 1912 (TEMC 1912).

• More comprehensive, covering the

motorized vehicle regulations and the
provisions for 3rd party risks.
OBJECTIVE OF TRO 1935
• Compulsory for all motor vehicle owners to have motor vehicle insurance in
respect of Third Party Bodily Injury and Death (TPBID).
• It refers to the risk of the insured or the authorized driver being legally liable to
pay compensation to the 3rd party for death or bodily injury.
• The 3rd party or victim can be one of the following:
✓ Pedestrian(s)
✓ Driver(s) of other vehicle(s)
✓ Passenger(s) of the insured vehicle or other vehicle(s)
✓ Other person(s) injured by the use of motor vehicle
EXAMPLES THAT LEADS TO THIRD PARTY BODILY INJURY
AND DEATH CASES :
• Negligently open the car door
without looking carefully.
• Did not stop when the traffic lights
turn red.
• Making u turn at the wrong place.
• Did not place a safety triangle to
warn other drivers.
• Drove at high speed and above
limit.
• Drove when he was too drunk to
drive.
• Overtook other vehicles from the left
side.
ROAD TRAFFIC ORDINANCE (RTO) 1958

• This ordinance regulates the registration

of vehicles and imposes minimum
insurance requirement for Third Party
Bodily Injury and Death (TPBID) for
vehicles to be used on a public road.
MOTOR INSURANCE BUREAU (MIB)
• The Motor Insurance Bureau (MIB) was incorporated on 24th October 1967.
• The MIB is giving an undertaking to compensate victims (whether as a driver, passenger or
pedestrian) who cannot recover due to :

• As at the time of accident the motorist responsible did not have the required insurance
(uninsured drivers)
• There was insurance but it was not effective.

• Note that, unlike MIB of UK, the scope of the MIB of Malaysia does not include hit and run
cases.
• Moreover, the Malaysian version of the ‘Motor Act’ or ‘Act Only’ cover does not include Third
Party Property Damage (TPPD) claims like in the UK.
MOTOR INSURANCE BUREAU (MIB) MALAYSIA
• The negligent motorist did not have minimum ‘Motor Act’ cover required by the Road
Transport Act (RTA)1987 (uninsured).
• There was a motor insurance but the cover was not effective :
• The policy was not extended to include a cover required by the RTA 1987, for example
passenger liability cover for vehicles used for Hire or Reward (taxis and buses).
• Due to breach of certain terms and conditions (other than those prohibited by Section 94 &
95 of RTA 1987).
• The policy had been effectively cancelled before the accident happened.
• The insurer could prove that the Certificate of Insurance (CI) or Cover Note (CN) was a
forgery.
• The Insurers / Takaful operators gone to liquidation.
SEVERAL IMPORTANT STEPS TO FOLLOW
1. You can submit your claim directly to MIB or appoint a lawyer to do so.
2. You must identify the motor vehicle that knocked you (e.g. ABC 1234). MIB's Malaysia no
longer pays you for hit-and-run cases.
3. You must submit your claim within three (3) years from the accident date.
4. If you appoint a lawyer and he proceeds to file a lawsuit, he must notify MIB within 30 days
of filing the lawsuit and provides MIB with all the relevant documents.
5. MIB will only pay for your bodily injuries (e.g. abrasions, bone fractures). MIB will not pay for
damage to your motor vehicle, clothing, shoes, watch, loss of earnings, medical bills, etc.
6. The amount of payout is subject to MIB’s discretion and is on a goodwill basis.
YOU NEED TO PREPARE THE FOLLOWING DOCUMENTS

1. Cover letter describing your accident, your Please make a spare set and submit the originals
intent to claim and list of documents. to:
2. Your police report (must state the third
party vehicle’s license plate number).
Motor Insurer's Bureau of West Malaysia
3. Third party vehicle driver’s police report (if
available). Wisma Piam, No. 150-3, 3rd Floor, Jalan Tun
4. Your medical report. Sambanthan, Brickfields, 50782, Kuala Lumpur,
Wilayah Persekutuan, 50782 Kuala Lumpur,
5. This is applicable to accidents that take Malaysia
place in Sabah and Sarawak too.
Phone: +60 3-2274 7395
** When you receive a reply from MIB, they
will request a RM100 fee for them to
conduct their investigation on your
accident.
THREE (3) EXAMPLES OF WHEN THE MIB IS NOT
LIABLE
• For injuries to victim who is non-fare passenger in a Private Car.
The Malaysian Road Transport Act (RTA) 1987 does not make cover for liability to
passengers compulsory. This is only required for passengers carried for Hire or Reward such
as in taxis and buses only (Commercial Vehicles).
• For accidents happening on roads not accessible to the public.
This is because the ‘Motor Act’ or ‘Act Only’ insurance is only compulsory for motor vehicles
used on roads where public have access to.
• If there is an insurer available (within the definition of ‘insurer concerned’) to satisfy
the judgment, then MIB need not to be liable.
An example of this is when the accident falls within the policy exclusion, but the insurer is
compelled to pay the RTA as it is a ‘Motor Act’ liability. The MIB is not liable to pay such a
claim as the ‘insurer concerned’ will handle it themselves.
MOTOR TARIFF 1978

• The 1st Motor Tariff was introduced by the General Insurance Association
Malaysia (PIAM) in 1978 to regulate motor insurance practice in Malaysia.
• Motor insurance premium in Malaysia is self-regulated by the rules and
regulations of motor tariff which is under the supervision of Bank Negara
Malaysia under Section 144 of the repealed Insurance Act 1996 and Section
275 of the Financial Services Act 2013.
• All PIAM members are all bound by the tariff.
• Different set of Motor Tariff for Peninsular Malaysia and East Malaysia.
COMPREHENSIVE MOTOR PREMIUM WERE DETERMINED BY

• Model of vehicles
• Age of vehicles
• Engine capacity of vehicles
• No Claim Discount (NCD)
CASH BEFORE COVER (CBC) 1980

• The Assumption of Risk and Collection of Premium Regulation 1980,

commonly known as Cash Before Cover (CBC) Regulations 1980 have been
in force since 1st November 1980.
• CBC Regulations was introduced to ensure all premium for Motor Insurance
be paid in full to the Insurer before the commencement of any insurance
cover.
• It means that the insurance Cover Note, or policy can be issued only when
premium has been paid to the insurer or his authorized agent.
• Insurance Act 1996, all motor transactions are subject to "Cash Before Cover"
or known as CBC.
AGE ELIGIBILITY FOR VARIOUS CLASSES OF LICENSE AND
TYPES OF VEHICLES

Class Vehicles Age

A1 & A2 Disable Vehicles 16
B, B1& B2 Motorcycle 16
D Car 17
E Lorry 21
(Possessed CDL D Class)
Public Service Vehicles (PSV) Conductor 18
Bus 21
(Possessed CDL E Class)

Taxis 21
(Possessed CDL D Class)
COMMERCIAL DRIVING LICENSE ISSUED BY LAND PUBLIC
TRANSPORT COMMISSION

• Good’s Driver’s License (G.D.L)

• Intend to allow drivers of vans and lorries to ferry or transport goods
belonging to companies or factories from 1 place to another.
• License A (LA) Carries : issued to vehicles carrying items for rent
and hire.
• License C (LC) Carries : Issued to vehicles carrying privately
owned items
• Public Service Vehicles (P.S.V)
• For driving passenger carrying vehicles such as buses or taxis.
PIAM APPROVED REPAIRERS SCHEME (PARS) 1983

• The PIAM Approved Repairers Schemes (PARS) was first introduced in 1983
since number of fraudulent claims arise significantly.

• The main objective of this scheme is to enhance the standard of service,

quality and professionalism of workshops involved in the repair of
accident vehicles.

• Under the scheme, all vehicles involve in accident must be repaired by the
authorized workshops approved by PIAM. Currently, this scheme operates
nationwide.
• As of June 2022, PIAM manages
662 workshops that are operating
nationwide.
• Benefits of PARS :
• A warranty period of 6 months on
workmanship given by the
workshop on the repair vehicle
• Comfort that the workshops have
been approved by PIAM
• A body that the policyholders can
refer to if the services of these
workshops are not satisfactory.
 TYPES OF COVERAGE
• Act only : 3rd party Bodily
Injury and Death (TPBID)

• Third party only : Act only plus

3rd party Property Damage.

• Third Party Fire & Theft : 3rd

party plus own damage as a
result of Fire and Theft.

• Comprehensive : 3rd party, fire

and theft plus other own
damage specified in the policy.
LIMIT OF LIABILITY 1995
• Limit of Liability of the Third Party
Property Damage (TPPD) is
increased from RM100,000 to RM3
million for Private Car (PC),
Motorcycle (MC) and Commercial
Vehicles (CV) with effect from 1st
January 1995.
• Limit of liability of TPPD can be
further increased to maximum RM20
million with additional premium.
• Limit of Liability of the Third Party
Bodily Injury and Death (TPBID) is
unlimited.
SELF-ASSESSED QUESTION

• Find out the development of Motor Insurance in Malaysia from

year 2015 onwards and cite the reference accordingly.
• Use APA format.