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%.

New Motor Claims Framework

If you have not heard of the new Motor Claims Framework (MCF) initiated by General Insurance Association of Singapore, I would advise you to lend me your ear for a while. This is because the new MCF will require some changes in accident reporting for all motorist.

This new ruling will commence with effect from 1st June 2008.

What are the requirements? Well, this new ruling requires all motorist to report to their insurer's approved reporting center (ARC) with their accident vehicle within 24hours or the next working day . This is irregardless whether or not the vehicle is damagd or whether or not there is any possible claim.

Now, failure to comply will result in insured losing part of his No Claim Discount (NCD) and prejudice their claim. How about that? The GIA termed this as non-reporting NCD.

So, if your NCD is 50% on now, on renewal, it will step down by 10%. As such, the renewal NCD will be 40% only. One thing to note is the accident NCD will apply first before the non reporting NCD. As such, if you have 50% NCD currently, and there is a at-fault claim against your policy, your NCD will become 20% on renewal. Due to the non-reporting, your NCD will drop further to 10% only.

So, if you do not want to jeopardize your claim or affect your NCD, the only way is to comply with the requirement. Do check with your respective insurers on the list of approved reporting centres. Most of the time, the insurer's authorised workshops are also the approved reporting centres.

If you are interested to find out more of the rationale behind this new MCF and more, watch this corner again!