Bank Negara, PIAM hit at MyCC’s penalty plan


  • Business
  • Thursday, 02 Mar 2017

They say proposal will severely impact consumer interest

PETALING JAYA: Bank Negara and Persatuan Insurans Am Malaysia (PIAM) have hit out at the Malaysia Competition Commission’s (MyCC) RM213.45mil penalty on local general insurers for allegedly infringing the Competition Act 2010.

In a statement, the central bank said MyCC’s proposed decision was “most unfortunate” and would severely impact consumer interest.

“Bank Negara firmly believes that the public interests are best served by continued progress on the reforms in the motor insurance market.

“Any decisions to review the arrangement independently of these reforms without taking into account consumers’ interest would prevent the public from enjoying timely settlement of motor insurance claims at reasonable costs and have confidence in the quality of repair works.”

MyCC recently imposed the penalty on PIAM and its 22 members, following investigations into an alleged infringement between PIAM and the Federation of Automobile Workshop Owners’ Association of Malaysia (FAWOAM) on trade discount rates for parts for certain vehicle makes and labour hourly rates for PIAM-approved repairers scheme workshops.

However, Bank Negara said the arrangement between PIAM and FAWOAM was put in place in response to a clear directive from the central bank to the general insurers in 2011 to address disputes between workshops and general insurance companies over insurance claims payments for motor repairs.

“Such disputes had given rise to protracted delays in repairs and caused significant inconvenience to consumers. Complaints were also received by the bank on unsatisfactory and high costs of repairs.

“The bank had received more than 500 complaints of this nature in 2011 alone prior to the arrangement. Such complaints have now been reduced by 50%.”

The central bank further said that the arrangement was necessary to reflect reasonable costs of repairs in an environment where motor insurance premiums were regulated by a tariff.

“Inflated claims, if not effectively controlled, would have necessitated significant adjustments to the tariff premiums affecting all consumers, or risked general insurance companies withdrawing altogether from the motor insurance market.

“This occurred in 2012 in relation to motor third-party bodily injury claims, when more than one million motor vehicles were referred to the motor insurance pool for declined risks due to difficulties faced by consumers to secure motor insurance at the prevailing tariff rates.”

Bank Negara subsequently sought and obtained the Government’s approval to implement staggered with limited incremental revisions to the tariff.

“The tariff still remains in place today,” it said, adding that measures are currently being taken by Bank Negara to implement broad reforms in the motor insurance market, which includes the gradual liberalisation of the motor insurance tariffs.

“This aims to promote a more competitive motor insurance market, while ensuring affordable motor insurance premiums in the long term.

“Without appropriate arrangements to control inflated and fraudulent claims which are being addressed as part of the reforms, these objectives will be severely undermined,” it said.

Bank Negara said it would continue to pursue a resolution of the matter in the best interests of the general public.

Meanwhile, PIAM said it was disappointed with MyCC’s proposed decision.

“PIAM has always worked in the best interest of the consumer and in full compliance with the directions of its regulator, Bank Negara.

“The PIAM-FAWOAM agreement was reached on Bank Negara’s directive to resolve significant consumer complaints regarding repair times in the motor insurance industry.

“PIAM sincerely hopes that MyCC will reconsider its proposed decision and the imposition of the financial penalty against its members. It will be obtaining legal advice to defend its position that this was not an anti-competitive agreement.”

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Business , MYCC , PIAM , Bank Negara

   

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