The government has not accepted CAP's proposal for a No-Fault Liability (NFL) scheme for road accident victims and has instead decided to maintain the present system with some changes.
The new third party motor cover which will be implemented early next year is also a fault-based liability (FBL) system. Accident victims will lose out with the rejection of the NFL scheme.
Since the new motor scheme is still based on the principal of FBL, it will not be different from the current scheme as at the end of the day the affected motorist will still:
- bear the risk of his claim being rejected by insurers;
The FBL scheme also fails to achieve the object of giving maximum benefit to accident victims. Out of every ringgit of premium collected 30 cents go to commissions and management expenses.
If lawyers' fees are deducted less than 50 cents will go to the victim. In an NFL scheme, no commissions and lawyers' fees need to be paid and the administrative expenses would be less than 10 percent of the amount collected. Thus 90 percent of the amount is available to compensate and rehabilitate victims and provide them other benefits.
Another disadvantage of continuing with a FBL system is that motor accidents will continue to rise. The number of motor accidents was 265,416 in 2001, rose to 363,319 in 2007 and reached 414,421 in 2010.
However, in an NFL scheme one of its foremost aims is the prevention of accidents and the promotion of road safety. The NFL scheme puts great emphasis on accident prevention in order to reduce the number of claims.
The implementations of the NFL in Victoria, Australia saw a 29 percent drop in road fatalities between 2000 and 2009.
If we can reduce road fatalities, this will itself lead to reduction in costs to the courts, in terms of manpower and time when the many road accident cases are being heard.
According to the latest statistics available, there were approximately 11,890 insurance claims pending in the Magistrates Courts throughout Malaysia in July 2006. As of June 2006, there were about 32,267 insurance claims pending in Session Courts.
Claims for compensation arising out of road accident ranked the second highest amongst the total number of civil cases filed during the same period. By switching to NFL, the courts will be freed to hear non-accident cases.
Thus the NFL is a better scheme for road accident victims. The reasons given by Bank Negara Malaysia (BNM) as to why the NFL could not be implemented are not convincing.
Firstly, BNM claims that it is the general public which wants to maintain the existing FBL system. However certain vested groups lobbying for the maintenance of the FBL system can in no way be construed as "public" consensus.
Had the public been given sufficient information on the merits of the NFL schemes compared to the existing FBL system, they would have chosen NFL system.
When the Attorney General Chambers proposed a NFL scheme in August 2007 and had consultation with all interested parties including NGOs, it must have been convinced that the current FBL scheme is not benefiting the victims of road accidents.
When BNM also organised a consultation in 2007 and brought experts from countries practicing the NFL scheme to explain how the scheme is carried out and the problems faced, it also must have believed in the merits of NFL.
Thus we do not understand the turn around by BNM and the rejection of the NFL.
The second reason is this: The NFL could not be implemented because a majority held the view that putting a limit on the amount of compensation for injuries suffered is a violation of a person's constitutional rights.
This view is mistaken as there is no constitutional right to unlimited damages. BNM had at one time suggested a RM2 million limit on the amount of compensation for injuries, which is an acceptable figure.
The sum that an accident victim can successfully claim for general damages for pain and suffering in the Malaysian court will depend on case law and the Civil Law Act 1956, which itself was amended to limit the damages recoverable in fatal accident cases.
The third reason given is this: The NFL scheme would need a strong complementary infrastructural support (e.g. fraud prevention and establishment of rehabilitation centres.) for it to work. Since money and time would be needed to move to the NFL scheme, it was rejected.
The NFL is not expected to be implemented immediately. A committee of experts would have to be appointed to plan in detail the establishment of the scheme. Complementary
infrastructural support will grow and develop along with the expansion of the NFL.
As we have emphasised to BNM before, SOCSO is a good example of a NFL scheme which is viable and working well. SOCSO today is a far cry from SOCSO of the early 1980s when CAP highlighted its shortcomings. So why cannot we have a similar scheme for road accident victims?
The implementation of the NFL scheme would take time, maybe a year or two but it is worth the wait because accident victims will benefit from it. It is unfortunate for them that this will not be happening.
The main issues and problems with the current FBL system cannot be solved by the new third party motor cover but only by the introduction of NFL cover.
CAP reaffirms its stand that the new FBL based scheme will not benefit accident victims and should be scrapped. Government must put the interest of road accident victims above that of parties which push for a FBL scheme in order that they may continue to profit from it.
SM Mohamed Idris is President of the Consumers Association of Penang.
