Scenario 1: The Insured vehicle sustained damages in an accident. It was
discovered that the engine of the vehicle had been changed to another with
the same cubic capacity. The Insured had, at the material time, submitted the relevant documents to the JPJ notifying the change of the engine and it was subsequently endorsed on the registration card.

The Insurers repudiated liability on the claim for indemnity for damage to the insured vehicle on the ground that "the engine has been changed and the same was not disclosed to us".

Scenario 2: The Insured's motorcar met with an accident after it skidded, veered to the left and collided against the hill slope on the left side of the road. The car sustained damage to the front section. It was sent to a workshop and inspections were carried out by the Insurer's appointed adjuster and the Insured's adjuster on separate occasions. It was found that the motorcar's front left tyre was defective.
The test carried out by the tyre manufacturer revealed that the average percentage of tread remaining on the tyre was only 5%.

The Insurers repudiated the claim by relying on condition 3 of the policy which is as follows: "The insured shall take all reasonable steps to safeguard the motor vehicle from loss or damage and to maintain the motor vehicle in efficient condition."

In both the scenarios, the Insureds disagree with the decisions made by their Insurers.

In these instances, do the Insureds have any recourse to resolve their respective disputes?

According to PIAM, if the senior management of the Insurer has considered the Insured's complaint and the Insured is still not satisfied, he or she can approach the Financial Mediation Bureau to consider the matter.

Financial Mediation Bureau

The Financial Mediation Bureau was set up by Bank Negara Malaysia in 2005 to replace the Insurance Mediation Bureau established in 1991. The Financial Mediation Bureau provides an independent and impartial method in resolving disputes between insurers and policyholders.

The independence of the Mediator is guaranteed by the council of the Bureau whose membership consists of people representing public and consumer interests and representatives of the members of the Bureau.

The Mediator can investigate and decide on a complaint, dispute or claim between the Insured and the Insurer.

For scenario 1, the Mediator at the Bureau noted the following condition that applies to the Insured's whole policy:

"7. This policy will only be operative if -
(v) You have taken all reasonable precautions to maintain Your Vehicle in an efficient roadworthy condition".

To fulfil this condition, it is therefore imperative that the Insured should change the engine of the insured vehicle if it is found to be defective or malfunctioned.

The Mediator also pointed out that there was relevant provision in the Guidelines on Claims Settlement Practices concerning the matter:-

"An insurer should not deny any claim merely on grounds of technical breaches of warranty or policy condition which are not material or connected to the circumstances of loss, unless fraud is suspected."

In the matter under reference the engine was changed to another with the same cubic capacity. Moreover, the JPJ had been formally notified and the necessary endorsement had accordingly been made in the record. There was no question of the new engine being overpowered that could affect the judgement of the underwriters to underwrite the risk neither was there any evidence of fraud.

In view of the above, the Mediator held that the Insured's decision in changing the engine of the Insured vehicle to another with the same cubic capacity was a technical breach which was not material to the circumstances of loss. Accordingly, the Insurers were liable to indemnify the Insured for the damages to the insured vehicle.

However, in Scenario 2, the Mediator noted that the expression "efficient condition" in this context means "roadworthy condition". Hence, the poor condition of the front tyres, that was essential if not integral parts of the vehicle, made the vehicle unsafe. That is to say the vehicle was not maintained in an efficient roadworthy condition.

In this instance, the Mediator confirmed the decision of the Insurers to repudiate the claim.

When do you make a complaint to the Bureau?

If you feel that your insurers have turned down your claim unreasonably, you can approach the Bureau for assistance. However, before you do that, your complaint must :

• First be referred to the senior management of the insurance company to give them the opportunity to resolve it,
• Be referred to the Mediator within six months of you receiving the final decision of the insurer
• Concern you personally and,
• Relate to a policy issued in Malaysia

How to make a complaint?

You can explain your complaint in writing to the Mediator at:

Financial Mediation Bureau
Level 25, Jalan 4
Jalan Sultan Sulaiman
50000 Kuala Lumpur

You do not have to use a professional to put forward your case to the Mediator. If you choose to do so, you will have to bear the costs yourself. At the moment, there is no charge for the Mediator's services or any experts that he consults.

If the matter is one that the Mediator can deal with, he will ask you to provide him with all the relevant documents.

The Mediator will also require your Insurer to provide all its files on your case.
Sometimes he will obtain expert advice or even bring the two sides together. If this does not resolve the matter, he will make a commonsense and fair decision based on the law and good insurance and marketing practice.

When the Mediator makes a decision, he will send it to you and to your Insurer. You can accept or reject it.

If you accept it and you are entitled to compensation, your Insurer must pay you any award up to:-

- RM200,000 (Motor & Fire insurance)
- RM100,000 (Others)
- RM5,000 (3rd party property damage)

If you reject it, you are free to act as you wish. A rejected decision does not affect your right to take legal action.

PIAM's Complaints Action Bureau

PIAM's Complaints Action Bureau can also assist to resolve any consumer complaints from either policyholders or third parties against its member companies.

In instances when the complaint remains unresolved, and if such complaint involves a personal claim of less than RM200,000, the Complainant may be recommended to refer the matter to the Financial Mediation Bureau.

PIAM's Complaints Action Bureau is located at:

3rd Floor, Wisma PIAM
150 Jalan Tun Sambanthan
50470 Kuala Lumpur

Points to remember

When making complaints to either the Financial Mediation Bureau or to PIAM's Complaints Action Bureau, you can ask for your complaint to be investigated into if:

• your insurance policy is with a company which is a member of the
  PIAM or the Financial Mediation Bureau (FMB). All PIAM members are members of FMB.

• you and your insurer have failed to reach agreement and it is within six
  months of the final decision of the senior management.

• you have not started legal proceedings.

Please send your questions on general insurance to:
Persatuan Insuran Am Malaysia,
3rd Floor, Wisma PIAM, 150, Jalan Tun Sambanthan,
50470 Kuala Lumpur.
Tel : 03 - 2274 7395/9
Fax : 03 - 2274 5910

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