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Bank Negara seeks feedback on proposed Insurers / Takaful Operators–Repairers Code of Conduct

09 January 2024

Bank Negara Malaysia (“BNM”) seeks feedback on the draft Insurers / Takaful Operators-Repairers Code of Conduct (“Code”) that was published on 21 December 2023.1
 
Objectives
 
The Code seeks, among others, to establish: 
  1. the minimum standards on fair, timely and professional conduct to promote more effective collaboration between Insurers and Takaful Operators (severally “ITO” and collectively “ITOs”) and Repairers2; 

  2. the requirement for an ITO to enter into a Service Level Agreements (“SLA”) with each of its Panel Repairers and the minimum requirements to be included in the SLA; and 

  3. an ITOs-Repairers Independent Dispute Resolution Framework3 (“IDRF”) to resolve disputes between ITOs and Repairers. 
Application
 
ITOs are required to abide by the requirements of the Code. Panel Repairers4 will also be required to comply with the Code by virtue of their SLA with ITOs.
 
Non-panel Repairers who are participants to the Code agree to comply with the requirements of the Code and to subject all disputes between themselves and ITOs to the IDRF.
 
Principles of the Code
 
ITOs and Repairers are required to comply with, among others, the following principles set out in the Code:
 
Professional and Fair Conduct
 
Observe high standards of honesty and integrity, transact in good faith when conducting business with each other and in providing services to Customers5, and ensure their staff and representatives behave in a professional and courteous manner.
 
Dispute Resolution Process
 
Resolve their disputes in accordance with the IDRF processes to avoid protracted delays in the claims process.
 
Obligations of ITOs and Repairers
 
ITOs’ obligations
 
ITOs’ obligations, among others, include: 
  1. providing estimates and authorising Repairs6 according to the standards and requirements set out in the Code; 

  2. dealing with Repairers in a fair and transparent manner, including paying them the agreed amount for completed Repairs authorised by the ITO in a timely manner; 

  3. working together with Repairers to resolve Customers’ complaints relating to the ITO’s decision on the approved amount or scope of work in a timely and transparent manner; and 

  4. ensuring their In-House Assessors comply with the minimum requirements on professionalism and fair conduct as provided in the Policy Document for Claims Settlement Practices. 
Repairers’ obligations
 
Repairers’ obligations, among others, include: 
  1. carrying out Repairs in accordance with the objectives prescribed in the Code, including fulfilling their obligations to the ITO under the applicable contract of repair according to the SLA with the ITO; 

  2. ensuring that Repair estimates and Repairs are in accordance with the standards and requirements set out in the Code; 

  3. preparing estimates that are accurate and appropriate and are guided by the prescribed databases as reference points for providing Repair estimations; 

  4. where there is no SLA between the ITO and the non-panel Repairer, the non-panel Repairer agreeing in a documented form to abide by the Code in carrying out the Repairs before commencing the Repairs; 

  5. providing equivalent standard spare parts related to the Repairs and reasonable warranty for such parts; 

  6. ensuring their staff assigned to Repair works have the relevant qualifications and/ or experience and carry out the work and conduct themselves in a professional manner; and 

  7. handling Customer complaints promptly, fairly and effectively and having in place proper processes and documented procedures for handling of complaints that specify the time frames for dealing with such complaints. 
Motor parts trade discounts, labour rate and labour time
 
The motor parts discounts and labour rates agreed between ITOs and Repairers shall be stipulated in the relevant SLA. If these terms are not in the SLA or where no SLA is signed between an ITO and a non-panel Repairer, the agreed motor parts discounts and labour rates shall be documented before the Repairs are commenced.
 
Panel Repairers of ITOs
 
Panel Repairers Schemes
 
ITOs that have Panel Repairers Schemes (“PRS”) shall comply with the requirements in the Code to publicise the criteria for membership, the procedure to register interest in joining its PRS and the criteria used to select a member of its PRS.
 
Disclosure of information on PRS
 
ITOs shall provide Repairers who are members of its PRS with information on the criteria and requirements for retaining their membership status, the key performance indicators (“KPIs”) used to evaluate their performance, feedback on the Repairer’s performance and the circumstances under which a Repairer’s status in the PRS may be terminated or suspended.
 
Terms of Service Level Agreement
 
ITOs must enter into an SLA with each Repairer who is a member of its PRS. The SLA must at a minimum, include the matters set out in items (i) to (xii) of paragraph 6.3(b) of the Code. Among these matters are: 
  1. a minimum tenure of an SLA of three years; 

  2. specific and measurable KPIs on quality of repair work, accuracy of repair estimate quotes, and Customers’ complaints and feedback; 

  3. obligation of Repairers to comply with applicable standards, guidelines and the Code; and 

  4. the requirement for a Panel Repairer to notify the ITO of any change in its ownership structure within 14 working days from the change so as to enable the ITO to determine whether a new evaluation of the membership is necessary. 
Estimation Process
 
The Code also requires ITOs and Repairers to ensure that the estimation process for Repairs is fair, transparent and timely and that estimates are comprehensive, complete and include all ascertainable damage.
 
Repair Warranties
 
Repairers are required to provide warranty for workmanship as stipulated in paragraph 7.5 of the Malaysian Standard on Motor Vehicle Aftermarket: Smash Repair Requirements of the Jabatan Standard Malaysia.7 Repairers are also required to provide warranty on the parts and components in accordance with paragraph 8.2 of the Code.
 
Payment to Claimant
 
The Code requires ITOs to make full payment to the Claimant8 or to his authorised representative within seven working days from the date of receipt of the offer, discharge voucher or the sealed court order for payment of a judgment sum.
 
Administration of the Code
 
The Code is to be administered by an Administrator established in accordance with paragraph 10 of the Code. The Administrator’s key responsibilities are set out in paragraph 10.3 of the Code.
 
Independent Dispute Resolution Framework
 
The IDRF consists of two processes, namely the ITO’s Internal Dispute Resolution (“IDR”) Process and the ITOs-Repairers Independent External Dispute Resolution (“EDR”) Process.
 
The Parties9 are encouraged to resolve disputes raised by Repairers against ITOs arising from alleged lapses or breaches of the Code in accordance with the IDR Process, and if they fail to resolve the dispute through the IDR Process, Repairers may escalate the dispute to the EDR Process.
 
Disputes listed in paragraphs 1.4, 11.2 and 11.3(a) of the Code are excluded from the IDR Process and the EDR Process. A Repairer is also precluded from escalating the disputes set out in paragraph 11.2(i) of the Code to the EDR Process.
 
IDR Process
 
All ITOs are required to establish an IDR Process and to ensure that the process is independent and impartial, as far as practicable.
 
ITOs and Repairers are also required to conclude the IDR Process within 10 working days from the date of lodgement of a complaint by the Repairer.10
 
EDR Process
 
The EDR Process is an arbitration process11 where the arbitrator is appointed by the Administrator from the panel of arbitrators to be established by the Administrator.
 
The following are some of the noteworthy points relating to arbitration under the EDR Process: 
  1. the arbitration costs are to be shared equally by the Parties; 

  2. the arbitration is to be conducted online; 

  3. legal representation is not permitted throughout the EDR process; 

  4. the decision of the arbitrator is final and binding; and 

  5. a party who has commenced proceedings in court or under any dispute resolution process not stipulated in the Code is not allowed to seek recourse to the dispute resolution process in the Code in respect of the dispute. 
The Parties are required to submit relevant and sufficient documents to the arbitrator within three working days from the latter’s appointment as arbitrator. The arbitrator is required to make a final and binding decision within 10 working days from full receipt of documents submitted by the Parties.
 
The possible consequences of non-compliance with the decision of an arbitrator are as follows: 
  1. appropriate actions will be taken by the relevant authorities against a defaulting ITO; 

  2. removal of a defaulting Repairer from the ITO’s panelship; and 

  3. termination of a non-panel Repairer’s right to use the EDR Process. 
Parties are not precluded from seeking to enforce the arbitrator’s decision through court proceedings.12
 
Deadline for feedback
 
The deadline for submitting feedback to BNM on the Code is 19 January 2024.
 
Comments
 
The Code sets out BNM’s expectations that ITOs and Repairers are to conduct their dealings with each other as well as with Customers in a fair, transparent and timely manner. The implementation of the Code will certainly be welcomed by motor vehicle owners who make claims on their motor vehicle insurance policies or takaful certificates and persons making claims against vehicle owners under their motor vehicle insurance policies or takaful certificates.
 
Article by Kok Chee Kheong (Partner) and Chong Cai Yi (Associate) of the Corporate Practice of Skrine.
 
 
1 According to BNM, the Code is modelled after the Australian Motor Vehicle Insurance and Repair Industry Code of Conduct which has been customised to Malaysia’s context.
2 A “Repairer” refers to appointed Repairers that handle Repairs of accident motor vehicles in Malaysia.
3 The main provisions relating to the IDRF are set out in paragraph 11 of the Code.
4 A “Panel Repairer" refers to a Repairer who is a member of an ITO’s Panel Repairers Scheme.
5 A “Customer” refers to a policy owner, takaful participant and/or a Claimant.
6 “Repair” refers to, among others, any work done by a Repairer to fix a motor vehicle, including any of its components, systems or parts, where the work is insured or covered by a motor vehicle insurance policy or a motor vehicle takaful certificate and where a claim is or will be made by a Claimant.
7 The warranty period for the different categories of repairs is generally six months or 5,000 kilometres (whichever comes first).
8 A “Claimant” refers to a policy owner/ takaful participant insured or covered by an insurance policy/ takaful certificate, as the case may be, or a person who has a claim against such policy owner/ takaful participant.
9 The “Parties” refer to a person who initiates the IDRF dispute resolution process under the Code and the person defending the complaint.
10 Paragraph 11.2(f) of the Code stipulates that the complaint is to be lodged through the Merimen system.
11 Footnote 20 of the Code provides that the arbitration is to be in accordance with the Arbitration Act 2005.
12 Footnote 31 of the Code.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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