Know Your Rights - Motor cover – better safe than sorry

THERE are two types of motor insurance policies in the market – third party motor insurance and comprehensive motor insurance. All motor vehicles are required by law to be insured.

For motor vehicles that are still under hire purchase financing, the owner of the vehicle – either a bank or credit company which lets the vehicle on hire purchase to the hirer – requires the hirer under the terms of the hire purchase agreement to insure the motor vehicle under a comprehensive motor insurance policy. The risks normally insured against include physical damage to the vehicle of the hirer, theft, accident, bodily injury to third parties, windscreen damage, flood and passenger liability. The premium payable is controlled by Persatuan Insuran Am Malaysia. When a person buys a new motor vehicle under hire purchase financing from a bank or credit company, the buyer is actually the hirer of the vehicle while the bank or credit company is the owner. It has been the practice of the Road Transport Department to state in the motor vehicle registration card to say the hirer is the owner while there is an ownership claim by the bank or credit company. For passenger motor vehicles, the Hire Purchase Agreement is adopted from the format under the Hire Purchase Act 1967.

The owner will specify the minimum mandatory risks the motor vehicle should be insured against and for what value. An insurance cover note will be issued immediately when an insurance proposal form is completed and the insurance premium paid in full. The motor vehicle company can then proceed to have the motor vehicle registered against a letter of undertaking issued by the bank or credit company to the motor vehicle company. A party who wishes to buy a motor vehicle under hire purchase financing is in law the hirer of the motor vehicle and will automatically become the owner of the vehicle when the hire purchase facility is fully paid. However there is a need to submit the motor vehicle registration card and the letter issued by the financier to cancel the ownership claim. Technically speaking, a person who has a motor vehicle still under hire purchase financing can only deal with the motor vehicle with the consent of the owner.

Most motor vehicle hirers leave the insurance cover arrangements to the motor vehicle company which sold the vehicle to the bank or credit company which in turn lets the vehicle on hire purchase to the hirer. Many do not bother to enquire or to check whether the risks covered are wide enough and the amount insured is sufficient should a claim arise. For example in areas where it is flood prone, it may be advisable to cover the risk of floods. Additional risk insured can be provided by the insurance company subject to additional insurance cover like riots, passenger liability and windscreen breakage. For every additional risk covered, additional insurance premium is payable.

Most motor vehicle hirers do not bother to read the terms and conditions in the insurance policy thinking the terms are standard for everyone. They will look at the policy and read the terms and conditions when the hirer wants to make a claim. By then it may be too late to realise that certain risks are not covered under the insurance policy.

The first thing motor vehicle hirers need to do in the event of a potential claim by the hirer against the insurance company or some third party who had indicated that a claim may be filed against the driver and/or the hirer is to lodge a police report stating the date and time of the event, a sketch plan, the motor vehicle registration and identity details of other parties who may be called as witnesses in the event a claim is filed in court. One has to be careful that the police report is accurate. There should be no admission as to liability for the event that had taken place which resulted in the incident loss taking place. Always wait for the police to complete the investigation and see which party is at fault.

One has to be extra careful when unknown parties may appear to be helpful by either making the police report or filing an insurance claim on your behalf.

If possible, try to inform the insurance company immediately. It will provide guidance on the claims procedure and the location of the nearest authorised panel workshop. It is advisable not to sign any document or allow the motor vehicle to be towed to any workshop unless directed by the insurance company. If the insurance company personnel is not available, it is preferable to leave the vehicle at the police station where the report was lodged.

If the insurance company appoints an insurance loss adjuster to survey the losses suffered and the potential quantum of the claim, it is advisable to provide full co-operation to the adjusters. If possible, take photographs of the surroundings and condition of the other motor vehicle or vehicles or party or parties involved in the event.

For a motor vehicle not under hire purchase financing, the owner should continue with the comprehensive motor insurance policy for better protection instead of a third party motor insurance which only covers bodily injury and property damage to third party.

Knowing the terms of the insurance policy cover purchased and claims procedure will avoid the possibility of being misled on what to do when filing a claim against the insurance company so that the claim made may be expeditiously processed and paid.

The writer, formerly a banker, is a lawyer. Comments: letters@thesundaily.com