New Motor Claims Framework - Rationale and clarification

The new MCF has raised a lot of questions among all insurers. Though there was discussion among the GIA committees since months back, but a lot of grey areas and doubts still lingered on the minds of insurers from what I heard.

However rough and tough the road ahead for implementing this measure, it seems to be one of the last straw for Monetary Authority of Singaore (MAS) and General Insurance Association of Singapore (GIAS) to implement it. The reason is simple: underwriting losses are simply not acceptable. The catalyst should be the S$103 million losses incurred in year 2007 by insurers which brought back sad memories of the year 2002.

It doesn't help further by the known fact that many claims are inflated, be it proerty claim or bodily injury case. Take for example, you are involved in a minor accident and at the scene of the accident, both parties didn't suffer any visible damage on the vehicles and neither parties are injured. Weeks later, you received a writ of summon from the Third Party lawyer seeking compensation for S$5,000 repair cost and over S$10,000 in injury claims. Note, this is NOT uncommon.

Inflated claims translate to higher premiums. But, it is not fair and it is not right to insurers and consumers. Thus, the new MCF, if successful, should lower the severity of claims sustantially. Maybe by a good 30-40%.

So, let's keep our fingers cross and comply with the MCF for now. It's a win-win situation in the long run.

Last but not the least, I'll just reiterate on the non reporting implication. Your NCD will step down by 10% for each non-reporting accident. So, if you have 2 non-reporting accident in a policy year, your NCD will step down by 20%.