I refer to the letter Consumers deserve a 'no fault' liability motor scheme .

SM Mohamed Idris has written in support of establishing a no-fault liability motor insurance scheme (‘NFL scheme’). Before proceeding further, it is best that I disclose that I am a practicing lawyer. My main area of practice is in personal injury/dependency claims.

This area of practice is not easy. One deals with clients from a wide social spectrum. Many are low-income earners. Some have lost their employment due to their injuries. Some are independent workers who are paid, provided they work. Who pays for their medical bills and surgical expenses?

In many cases, the lawyers who take these cases have to foot the bills in the hope that the clients will refund these expenses when the claims are settled or payment received following a successful claim in court.

In view of the recent changes in the courts where cases are expedited and postponements actively discouraged, both the lawyer and client have benefitted. The client has a much better chance of earlier recovery of compensation for injuries sustained. The lawyer who may have footed the medical and surgical bills also stands to benefit as he too can now recover these expenses and his fees earlier.

Mohamed Idris has put forward his views favouring the introduction of a NFL scheme. However, from my reading of the several articles/letters in the newspapers and the press release of Bank Negara Malaysia (BNM), it is apparent that BNM does not propose a NFL scheme.

Instead, BNM’s proposal seems to have the following features:

a separate company is established to deal with claims from road accident victims. The funding of this company is uncertain. What is certain is that an enormous amount will be needed initially as seed capital;

there will be a limit on the amount payable to road accident victims (and presumably their families, in the event the accident victim is killed or is unable to work). The amount that seems to be favoured by the insurance industry is the maximum sum of RM100,000 (this cap in the amount payable is a drastic change to the existing system);

there will be a need to establish liability. In short, if the accident victim was at fault or partially at fault, then he either gets nothing or there is a proportionate reduction of the amount payable, depending on the degree of fault (this is similar to the existing system);

there will be no reference to the courts and no role for lawyers. So the first point to note is that the proposal of BNM is not a NFL scheme.

Further, I would not support a NFL scheme for the following reasons:

from a moral perspective, we have to consider whether it is beneficial to allow a person who has driven recklessly or negligently to be compensated. If a person who drives recklessly or negligently is compensated, what is the message that we are sending to road users – would they be encouraged to use public roads in a safe manner or would the opposite be the more likely scenario? Statistics in certain states in America where a NFL scheme is in place show an increase in the motor accident rates following the introduction of the NFL scheme;

from a social perspective, would a NFL scheme encourage fraudulent claims? If it is common knowledge that any one who suffers injury in a motor accident can obtain compensation, there is a chance that certain unscrupulous people will take advantage of the situation and put in false claims or create accidents so as to enable claims to be made. Again, statistics in certain states in America where the NFL scheme is in place show a marked increase in fraudulent claims in comparison to states in America which do not have such a scheme;

from an economic perspective, would a NFL scheme result in an increase in premiums? Again, statistics in certain states in America where the NFL scheme is in place show a marked increase in insurance premiums in comparison to States in America which do not have such a scheme.

As a result of the above concerns, some of the states in America which initially introduced a NFL scheme, have withdrawn such schemes.

It is also relevant to point out that in countries where the NFL scheme has worked fairly well (such as in New Zealand), there is an established social security network which provides additional health, medical, unemployment and educational benefits to individuals and families (including those affected by road accidents). Malaysia is not a social welfare state. And therefore, we cannot employ the same methods as in other countries which are social welfare states.

For the above reasons, I do not believe that a NFL scheme with limited payments is the way to go for Malaysia. On the present proposal of BNM, I observe as follows:

how much does RM100,000 get these days? If an accident victim suffers serious injury, this amount may be barely enough to cover the medical and surgical expenses that may be incurred. And if the accident victim cannot work thereafter, how is he going to sustain himself and his family? The beneficiary from this limited payment will be the insurance companies who will now have to pay much less as compensation;

the option is there to take additional insurance coverage. How many of us can afford additional insurance coverage? Many low income earners are barely making ends meet – to require them to take additional insurance coverage would be an additional burden to them and their families. The immediate beneficiary to additional insurance coverage is again the insurance companies who will earn substantially more insurance premiums;

who will run the separate company that will be entrusted with considering the claims and making the payments? Will this be done in an open and transparent manner? The last thing we want is a situation where, for certain reasons, legitimate claims are rejected and again, for certain reasons, fraudulent claims accepted;

who will pay the medical and surgical bills for the low-income accident victims (presently paid in many cases by the lawyers handling the matter)? The separate company to be established is unlikely to make any payments until the authenticity of the claim is established by an independent party (probably the police) and reports obtained from the relevant hospitals treating the accident victim. And, it is common knowledge that it takes time (in some cases much time) to obtain police reports, hospital reports and to determine the outcome of police investigations;

who will do the running around to get police reports, hospital reports and specialist medical reports (presently done by the lawyers handling the matter) so that all these are put forward to ensure that accident victims are adequately compensated? In view of the efficiency of the present system (or rather the inefficiency), some one has to liaise with the relevant parties, compile the documents, obtain further documents (if necessary) and obtain views of medical specialists. Is the injured accident victim or family member of a deceased accident victim able to do all this?

while the courts and lawyers are not to be involved in the BNM scheme, this does not necessarily mean that claims will be settled faster. Third parties such as the police and hospital authorities are involved. The reports from these parties all take time (and in some cases, much time);

although Mohamed Idris seeks prompt payment for victims through a system of guaranteed payments to hospitals, this will not happen under the BNM scheme. And even if there is such a guarantee, how much can a victim expect to get up-front if the maximum amount payable for the severest of injuries is only RM100,000? And is it likely that any payment will be made before the police have verified the authenticity of a claim?

Regardless of whatever system in place, much depends on the professionalism of the police force. Whether it is a NFL scheme, the BNM scheme or the existing scheme, it is the police force who will have to determine the authenticity of claims.

Contrary to the position of Mohamed Idris, the police will not have more time to concentrate on criminal cases if an NFL scheme is implemented. Even in a NFL scheme, a fraudulent claim will not be compensated. The police will therefore still have an important role to play even in a NFL scheme. And, there are clear indications that a NFL scheme may result in more fraud and therefore resulting in more police time being expended on investigating accident claims.

Instead of putting in place a wholly new system with limited amounts payable which can only benefit the insurance industry, would suggest that we look at the existing system. Things have changed for the better in the past few months. The courts under the revitalised leadership of Zaki Tun Azmi have taken bold steps in expediting the disposal of cases. The impact of these is already felt – there is much faster settlement of claims and/or disposal of claims.

But there is a need to further improve the present system. One area would be on the amounts that lawyers can take as fees and disbursements. I am aware that the Bar Council is taking steps to put in place a scale of fees for lawyers involved in personal injury matters. This will ensure that lawyers are fairly compensated for their services but not to the detriment of the accident victim.

And regardless of whatever system in place, steps must be taken to ensure that police reports and hospital reports are made available within a reasonable time. This will further reduce the delays in an accident victim or the family of an accident victim receiving compensation.

To the insurance industry which is constantly harping on motor insurance being a loss making venture, it is necessary to point out that the other insurance divisions in an insurance company (such as fire, marine, public liability insurance etc.) are making profits and in some cases substantial profits. I do not see insurance companies seeking to give up their insurance licences because of their concerns on the motor insurance business – the reason is obvious, their other insurance divisions are making profits. Further, the recent interview of the principal officer of P&O Insurance shows that insurance companies can make profits from the motor insurance business.

For all the above reasons and more, I urge the Consumer Association of Penang under Saudara SM Mohamed Idris to reconsider its position in this matter. CAP can and should advocate a change for the better for accident victims and their families. NFL is not the way and we should learn from the states in America which have withdrawn the NFL scheme.

Let us all work together to change the existing system for the better. It will benefit all of us. It will especially benefit the accident victim and their families by providing reasonable (but not excessive) compensation to be paid-out expeditiously.