Monday, January 10, 2022

Water damage and flood damage are not the same thing, and flooding in Malaysia is often caused by man, not God-Malaysian general insurers attempts to avoid claims from vehicle owners affected by recent floods not as easy as insurers would like the public to believe

 by Ganesh Sahathevan 

There has been much commentary in Malaysia about the lack of insurance coverage for owners of motor vehicles whose vehicles have been affected by the recent floods.

In essence, motor vehicle owners have been told that unless they chose and paid for the flood cover option, they are not covered.

However, water damage and flood damage are not the same thing, and the issue may well be about the type of damage the vehicles have been insured against. 

Then,  flooding in Malaysia is often, at least in the Klang Valley, caused by developments that have ignored if not recklessly altered terrain and waterways.  The Act Of God escape clause often relied upon by general insurers  may not be available. 

Vehicle owners need to take a good hard look at their insurance policies, and avoid the temptation to interpret technical documents without the assistance of a good, sensible lawyer.


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Saturday, January 1, 2022

Malaysia's general insurers suffer flood damage payouts in the face of a declining stock market and the loss of Bank Negara's protective mantle

 by Ganesh Sahathevan 


       KLCE simple moving average and moving average convergence divergence (MACD) indicators.   2017-2021




Malaysia's general insurers are reported to have suffered  potential flood damage payouts of USD 718 Million, or approximately MYR 3 Billion. 

They do so in the face of a stock market that has been on a downward trend for the past five years (see graphs above).Investing premiums in stocks is how insurance companies in Malaysia make their money, and the declining market is quite likely to have eaten into their surpluses.

Worse,  they are likely to have to do so without Bank Negara's protective mantle. There has always been a cosy relationship between Bank Negara and the owner-managers of the financial institutions the Bank is supposed to supervise which has in the past allowed the financial institutions to continue in business even when there were serious financial problems. 

The Bank however has been the subject of some recent adverse  disclosures with regards the 1MDB scandal and it is no longer, as a result, the politically influential body that could provide its friends protection. 

More to the point, the majority of flood victims are Bumiputera. Any attempt by the insurers to evade payouts will face intense political scrutiny, and is likely to fail. 


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Malaysian insurance group estimates flood claims payout at $720mn

December 29, 2021


The General Insurance Association of Malaysia (PIAM) has estimated the total payout from claims as a result of the floods that swept across Malaysia recently could total RM3 billion (USD720 million).

These estimates include actual and potential personal lines and commercial risks claims directly resulting from the recent flash floods and the upcoming monsoon season.

The country saw three days of torrential rain over a weekend which has caused severe flooding in eight states, partially submerging a number of towns and villages.

The government has come under fierce criticism for not issuing warnings in time and being slow to respond, with fears of the death toll rising sharply as more bodies are found.

As of the 27th, an estimated 51,000 people had been evacuated from their homes, of which most were from Pahang on the eastern coast of the Malay peninsula, one of the worst-hit states.


In addition to above estimated total claims payout for this event, the general insurance industry is donating and contributing RM2.43 Million to a newly established Flood Relief Fund.

The fund is a Corporate Social Responsibility (CSR) initiative to support the adversely affected motoring community during these difficult times.

This initiative has been designed to help expedite claims settlement, provide additional special relief measures, and further ad hoc ex-gratia assistance, as determined by individual general insurers.

This CSR assistance will initially be in the form of a subsidy towards a clean-up at workshops for vehicles directly affected by the floods, capped at a one-off per vehicle subsidy of RM500 for cars and commercial vehicles, and RM100 for motorbikes.

Claimants will need to produce requisite evidence of flood damage to their vehicles and proof of previous insurance cover, which must be either currently insured or a vehicle that was last insured on 1st June 2021.

At this stage, the fund will be closed once the pledged amount of RM2.43 million has been exhausted.

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