Bank Negara Malaysia wishes to announce new measures on motor insurance aimed at ensuring consumers are advised accordingly on the appropriate market value of motor vehicles when purchasing a comprehensive motor insurance cover for private cars.  This measure aims to address the issue of over or under-insurance of motor vehicles, which can result in consumers paying higher than necessary premiums or receiving a lower compensation following a claim against the insurance policy.   

With effect from 1 August 2011, insurers (and also takaful operators) and their agents are required to advise consumers before purchasing or renewing motor insurance of the following:-

• the present market value of the private car;
• the importance of insuring the motor vehicle at the appropriate market value; and
• the effect of over-insurance and under-insurance when a claim is made.

The advice to consumers on the present market value must be based on the ISM Automobile Business Intelligence System (ISM-ABI system) or any other credible vehicle valuation database.  The present market value of the vehicle will be indicated in the renewal notice or product disclosure sheet that is issued to consumers.  To ensure consistency in the market value of an insured vehicle at the point of insurance and subsequent claim, insurers are required to refer to the same database to determine the market value of the vehicle for both instances.

The coverage of the database will address the vast majority of privately-owned vehicles. However, the database does not include commercial vehicles and motorcycles.

The new measure on provision of advice on market value of motor vehicles will contribute towards more objective determination of the market value of motor vehicles for purposes of purchasing motor insurance and claims settlement.  This complements existing measures that promote the fair treatment of consumers, including requirements for insurers and their agents to explain to consumers the main features of a motor policy including the type of cover, scope of cover and exclusions, contractual rights and obligations of consumers as well as claims procedures.