Bank Negara issues Insurers and Takaful Operators–Repairers Code of Conduct
24 January 2025
Just over a year after the issue of a draft Insurers / Takaful Operators-Repairers Code of Conduct on 21 December 2023 (“
Draft Code”) for public consultation, Bank Negara Malaysia (“
BNM”) issued the
Insurers and Takaful Operators-Repairers Code of Conduct on 23 December 2024 (“
Code”).
1 The Code came into effect on
2 January 2025.
The Code is a cross-sector industry-driven initiative consisting of licensed general insurers and takaful operators (severally “
ITO” and collectively “
ITOs”), Repairers
2 and industry associations such as Persatuan Insurans Am Malaysia, Malaysian Takaful Association and the Federation of Automobile Workshop Owners’ Association of Malaysia. It also reflects the input from regulatory authorities such as the Malaysia Competition Commission, Road Transport Department and Malaysia Automotive Robotics and IoT Institute.
3
Objectives
Among others, the Code:
- sets out the minimum standards on fair, timely and professional conduct to be adhered to by ITOs and Repairers to promote more effective collaboration between ITOs and Repairers to further elevate professionalism and efficiency among ITOs and Repairers in handling motor claims and Repairs4; and
- provides for the establishment of a dedicated Internal Dispute Resolution (“IDR”) process by ITOs to resolve disputes between ITOs and Repairers in a fair, transparent and timely manner.
Application
The Code applies to:
- ITOs;
- Panel Repairers who are members of the Panel Repairers Scheme (“PRS”) of ITOs; and
- Non-Panel Repairers of ITOs who voluntarily sign up to comply with the Code.
Related legal instruments and documents
The Code is to be read together with other laws and relevant policy documents issued by the relevant authorities, including but not limited to the documents listed in paragraphs 6.1(a) to 6.1(g) of the Code.
Signing-up to become a participant to the Code
An ITO must ensure that its Panel Repairers become participants to the Code by signing-up through the Fermion Merimen Online eClaim platform. A Non-Panel Repairer of an ITO may become a participant to the Code by signing-up through the aforesaid platform. By signing-up to participate in the Code, a Repairer is required to comply with the requirements of the Code.
Participation to the Code is compulsory for Panel Repairers via their service level agreements (severally an “
SLA”) with the respective ITOs whilst it is voluntary for Non-Panel Repairers.
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, and comply with all relevant laws when conducting business with each other and in providing services to Customers
5, and comply with the minimum standards of fair conduct and transparency in their dealings with each other.
Dispute Resolution Process
An ITO shall establish and administer a fair, transparent and timely dispute resolution process to address and resolve disputes that may arise with Repairers.
Obligations of ITOs and Repairers
ITOs’ obligations
The ITOs’ obligations, among others, include:
- authorising Repairs with the objective of restoring the safety, structural integrity, presentation and utility of the motor vehicle;
- fulfilling their obligations to the policy owner/ takaful participant in accordance with their policy/ takaful certificate, applicable laws and regulatory requirements issued by BNM, including the Policy Document on Claims Settlement Practices and the Policy Document on Fair Treatment of Financial Consumers;
- approving repair estimates and authorising Repairs according to the standards and requirements set out in the Code;
- 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; and
- working together with Repairers to resolve Customers’ complaints relating to the ITO’s decision on the approval amount or scope of work in a timely and transparent manner.
Repairers’ obligations
The Repairers’ obligations, among others, include:
- 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;
- ensuring that repair estimates and Repairs are in accordance with the standards and requirements set out in the Code;
- preparing estimates that are accurate, appropriate and are guided by the prescribed databases as reference points for providing Repair estimations;
- where there is no SLA between the ITO and a Non-Panel Repairer, ensuring that the Non-Panel Repairer agrees in a written agreement to the terms and conditions to be observed before commencing the Repairs;
- using new franchise parts for vehicles that are aged below five years, with no betterment charges applied;
- repairing the motor vehicle in a timely manner and keeping the Claimant6 and the ITO informed of the completion time; informing the Claimant of any changes that have betterment implications that the Claimant may need to incur and informing the ITO of any changes to the repair estimate in a timely manner;
- ensuring their staff assigned to carry out the Repair works have the relevant qualifications and/ or experience and carry out the work and conduct themselves in a professional manner; and
- 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
For Repairs carried out by Non-Panel Repairers, ITOs and Non-Panel Repairers shall negotiate the motor parts discounts and labour rate per hour and record the agreed terms in writing before commencement of Repair. Where the labour time for repair work cannot be determined using the MRC database or other credible databases used by ITOs, the ITOs and the Non-Panel Repairers shall agree on the appropriate reference point to determine the standard hours for repair work and document the same in writing before commencement of the Repair.
Panel Repairers of ITOs
Panel Repairers Schemes
ITOs that have PRS shall comply with the requirements in the Code to publicise the criteria for membership of the PRS, the procedure for Repairers to register their interest in participating in the PRS and the criteria for selecting members 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, regular feedback on the Repairer’s performance against the KPIs and the circumstances under which a Repairer’s status in the PRS may be changed, including being re-evaluated, terminated or suspended.
Terms of Service Level Agreement
ITOs must enter into a written 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 (xiv) of paragraph 10.3(b) of the Code. Among these matters are:
- the tenure of the SLA, which must be a minimum of three years;
- specific and measurable KPIs on quality of repair work, accuracy of repair estimate quotes, and feedback on handling of Customers’ complaints;
- the obligations of Panel Repairers to comply with applicable standards, guidelines and the Code; and
- 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.
Fair terms
An ITO must ensure that the terms and conditions of the SLA:
- are fair (i.e. striking a balance between the rights and obligations of the ITO and the Panel Repairer) and reasonable, and written in clear and understandable language; and
- do not contribute to circumstances that can lead to poor consumer outcomes.
Termination of SLA
An ITO may review its business arrangement with its Panel Repairer, including consider terminating the same or suspending the panelship upon the occurrence of the events listed in paragraphs 10.8(a) to 10.8(e), subject to the right to notification, representation and remediation set out in sub-paragraphs 10.8(d) and 10.8(e) and paragraph 10.10, as applicable.
Each party may terminate the SLA by six-months’ written notice, stipulating the grounds and reasons for the proposed termination.
Estimate, Repair and Authorisation 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.
Actual Total Loss and Beyond Economic Repair Claims
An ITO is required to comply with Part 15 of the Policy Document on Claims Settlement Practices when handling an Actual Total Loss (“ATL”) or Beyond Economic Repair (“BER”) claim. ITOs and Repairers are required, among others, to abide by the following:
- an ITO shall ensure effective management of its Repairers in handling ATL and BER vehicles to ensure the credibility of its Repairers in handling ATL and BER vehicles; and
- an ITO shall impose clear obligations for its Repairers and put in place effective control measures for the handling of ATL and BER vehicles;
Actual Total Loss
Specific requirements applicable to ATL vehicles include the following:
- an ITO must declare a vehicle as an ATL if the vehicle has sustained severe damage which has compromised the structural integrity of the main chassis to the extent that it cannot be repaired or restored to a safe state; and
- an ITO and Repairer shall ensure proper deregistration of and disposal of ATL by adhering to the requirements set out in items (i) to (iv) of paragraph 11.4(f) of the Code.
Beyond Economic Repair
Specific requirements applicable to BER vehicles include the following:
- ITOs and Repairers must ensure repairs of a BER vehicle are completed and the appropriate certification of roadworthiness are obtained in accordance with paragraph 11.4(g) within four months from the date the Repairer receives the BER vehicle; and
- the requirement by the ITO and Repairer to comply with their respective obligations in paragraphs 11.4(i) and 11.4(j) in the event that the Repairer is unable to comply with the four-months restoration period stipulated in paragraph 11.4(g).
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. These warranties are reproduced in paragraphs 12.1(a) to 12.1(e) of the Code.
7 Repairers are also required to provide warranty on the parts and components in accordance with paragraph 12.2 of the Code.
The requirements in paragraphs 12.1 and 12.2 of the Code must be included in the SLA with Panel Repairers. Where no SLA is in place between an ITO and a Non-Panel Repairer, the ITO shall, as far as is practicable, obtain the Non-Panel Repairer’s agreement on the warranties in a written agreement.
Payment for Repairs
ITOs are required to ensure that any fees due to Repairers in the claims settlement process are paid in a timely manner.
ITOs are also required to make full payment to the Claimant or to his authorised representative within seven working days from the date of receipt of the acceptance of offer and all relevant documents (including the discharge voucher if applicable) or the sealed court order for payment of a judgment sum.
Administration of the Code
The Code is to be administered by a Code Administration Committee (“
CAC”) established in accordance with paragraph 14.1 of the Code. The membership of the CAC shall consist of an independent Chairperson
8 and eight representatives of industry stakeholders set out in paragraph 14.5 of the Code. The CAC is to be supported by a Secretariat.
The responsibilities of the CAC and the Secretariat are set out in paragraphs 14.2 and 14.3 respectively of the Code, and their operations are to be funded by the general insurance and takaful industry.
BNM shall be the responsible authority to oversee the effective administration and implementation of the Code and any subsequent reviews thereof. The CAC and Secretariat may refer enquiries pertaining to the Code to BNM for guidance or final decision.
ITO’s Independent Dispute Resolution
ITO’s IDR Function
As mentioned earlier in the article, the Code requires each ITO to establish an IDR to provide a dedicated dispute resolution platform for Repairers to raise any disputes arising from any alleged non-compliance of ITOs with the requirements of the Code and to enable the same to be resolved in a fair, transparent and timely manner.
The IDR process will apply to all disputes except for the six categories of disputes set out in paragraph 15.1(b) of the Code.
Implementation of the IDR Process
An ITO must ensure its IDR process is independent and impartial, as far as practicable. An independent staff or committee involved in overseeing the deliberation and decision making process under the IDR process must be independent from the staff responsible for the review, assessment and/or approval of the claims in dispute.
Repairers must lodge their complaints of an ITO’s alleged non-compliance with any requirement of the Code in accordance with the ITO’s IDR process. The complaint must contain, at the minimum, the information stated in Appendix 4 of the Code.
The ITO is required to acknowledge the dispute in writing within one working day from receipt of the dispute notification and shall conclude its IDR process no later than 10 working days from the date the dispute notification is lodged with the ITO. In exceptional circumstances or where a dispute is a complex case, the timeframe for an ITO to conclude the IDR process may be extended to not more than 20 working days from the lodgement date of the dispute notification.
A Repairer who is dissatisfied with the outcome and decision of an ITO’s IDR process must notify the Secretariat for record-keeping and monitoring purposes. The notification must contain, at the minimum, the information stated in Appendix 5.
Comments
As mentioned earlier, the Code was preceded by the Draft Code. It is interesting to note that the proposal in the Draft Code for the establishment of an External Dispute Resolution (“
EDR”) process has been omitted from the Code. According to BNM, this proposal has been deferred due to several practical challenges in securing the services of an independent external entity for this purpose, in particular the cost and pricing for such services. The requirement for the EDR process will be reconsidered as part of a holistic 12-month review of the Code in January 2026.
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With the present omission of the EDR process from the Code, it remains to be seen whether the IDR process which is established by ITOs will achieve the objective of being an impartial platform to resolve complaints raised by Repairers against the ITOs.
Article by Chong Cai Yi (Associate) of the Corporate Practice of Skrine.
1 Explanatory Note 1 of the Draft Code states that 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 a workshop which is a participant to the Code engaged in Repairs of accident motor vehicles in Malaysia and includes a franchise Repairer.
4 “Repair” refers to 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 of a Claimant.
5 A “Customer” refers to a policy owner, takaful participant and/or a Claimant, as the case may be.
6 A “Claimant” refers to a policy owner/ takaful participant 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.
7 The warranty period for the different categories of repairs is generally six months or 5,000 kilometres (whichever comes first).
8 Paragraph 14.6 of the Code requires the Chairperson to have relevant experience in the insurance/ takaful industry and motor repairs industry, and a strong record and reputation for impartial and unbiased decision making.
9 See Explanatory Note at page 24 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.