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Press Release


MAY 2009, KUALA LUMPUR. “New insurance premium and renewal of motor insurance commission contribute more than 20% of proton dealer’s total net income per car. PIAM’s proposal that was approved by Bank Negara via its circular to PIAM dated 17 April 2009 will destroy the Automotive Eco System, specifically the automotive dealer’s network. Motor insurance is an important segment of the automotive eco-system” said Armin Baniaz Pahamin, Acting President Proton Edar Dealers Association Malaysia (PEDA).

1. With the evolution of the motor industry in Malaysia, and in keeping with the requirements of the Hire Purchase Act 1967, new and used car dealers have become agents to the general insurers to provide value added service to their customers and financial institutions. The premium contributed by these dealers can range from RM500,000.00 to as much as RM1,000,000.00 per annum.

These premiums subsidised the increasing overhead cost as well as determine thebreak-even of car dealers especially during these economic crisis.

3. During this economic crisis, unemployment rate are increasing and the automotive industry are badly affected. PIAM proposal will further affect the automotive eco system and does not benefit both the insurance company and its agencies.

4. Bypassing agencies with a direct rebate to customers will contribute to a higher unemployment rate and further weakens the automotive eco-system.

5. Post-1998 recession, the Association of Banks in Malaysia (ABM) proposed and Bank Negara approved the abolishment of the market dictated Hire-Purchase commission and later imposed a regulated ‘Handling Fees’ with a ceiling capping. ABM acted in the interest of Banks and the automotive dealers lost more than 50% of their total income.

6. Now, the General Insurance Association of Malaysia (PIAM) proposed and Bank Negara approved a direct rebate for Motor Insurance. PIAM acted in the interest of the insurance companies in their struggle to capture market share between ‘Bank-owned’ and ‘non-bank-owned’ insurance companies. The automotive dealers will lost more than 20% income from PIAM proposal.

7. Both the ABM and PIAM are statutory associations and acted in the interest of the Banks and Insurance Company in Malaysia. There is no statutory body that represented the interest of the automotive eco system although Automotive Industry is a significant sector that contributed substantially to the Malaysia economic growth.

8. PEDA call for the establishment of a statutory “Automotive Council” to regulate and administer any new and/or revised governmental policy pertaining to the automotive eco system. Any issue pertaining to the automotive eco system should be referred to the proposed ‘Automotive Council’ and not by PIAM or ABM whom only acted on behalf of the license general insurance companies and Banks in Malaysia.

9. PIAM proposal will not revitalise the automotive eco system.

10.Automotive industry is Bank dominated market. Without Banks facilities for car vendors & dealers and hire-purchase end-financing for car buyers, the automotive industry will fail. Currently, banks are already enforcing dealers to terminate their existing insurance company in favour of Bank owned insurance company by imposing a hefty penalty and higher interest to the banking facilities rendered to the dealers (if the dealer do not subscribed to the bank insurance company)

11.Dealers were impliedly told they will not enjoy any insurance renewal commission when they subscribed to the bank insurance under force majeure. All commission for the insurance renewal are forfeited by the Bank.

12.Automotive industry contributed significantly to the Malaysia economy and is part of every 5 year Malaysia Plans (Rancangan Malaysia). A National Automotive Policy was also introduced for the automotive sector. in the absent of a statutory council to represent the Automotive Eco System, the automotive industry will be weaker and will continue to deteriorate.

PEDA will not hesitate to advice our members and other automotive car dealers association to ‘Boycott” members of PIAM that supported and implemented the proposal in favour of Takaful.



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