A billion-Ringgit scam annually, Malaysia's motor insurance industry needs overhauling
Jason · Oct 3, 2021 12:00 PM
If you've ever been involved in an road accident, you would know the trauma and hassle involved right from the start. Minutes after the accident, suddenly you find yourself surrounded by unsolicited tow trucks, where touts will jostle and 'offer' their services to you.
Then, if you can't settle the matter without police intervention, the nightmare truly begins. Lodging a police report itself is a tedious, thankless task. That's before you encounter even more unsolicited offers from 'runners' and middle-men who claim they can help 'settle' your case.
More often than not, after repairs are completed, insurance claims will be a difficult and painful process for car owners. Agents and middlemen will promise the earth and the moon initially but disappear when there are issues or claims to be made.
Yet, year in, year out, we pay through our noses for our car's insurance premiums, only for the insurance to then fail us when we need help the most. Helplessness, that's the sinking feeling we get the moment we have to even contemplate the whole insurance claims process.
But why is it like this? Is there no avenue for the consumers to voice our pain points? Who is fighting on our side? Who is protecting the regular man (and woman) on the street?
Personal insurance fraud stories? Plenty!
In case some are sceptical about these 'overexaggerated' stories, allow me to share with you a personal experience I had to endure. Back in 2014, my then-Proton Inspira was rear-ended by a 'P' license driver at Old Klang Road, quite badly I must say. Thankfully, my friends were quickly on scene to assist me, thus repelling the advances of tow truck touts.
I wasn't so lucky when making my police report. There was a man (let's call him Mr K) who was, on the pretext of assisting his 'customer' at the same police station, caught a glimpse of my car and started giving me unsolicited advice on what to do next. My friends have since gone home, on my request, as I thought I could handle the rest (how wrong).
Being in a reasonable amount of distress (and it was almost 12am) and the fact that I just wanted a solution, I got suckered in to let Mr K handle the repair works at his network of 'panel workshops'. It was in a familiar area in Damansara, which meant I could drop in to check on the car (I am quite OCD about people handling my car).
Drop in I did, and boy was I in for a surprise. Said 'panel workshop' was not only 'bawah pokok' but 'tepi sungai' somewhere in Kayu Ara. It was run down, dirty and.... not confidence-inspiring I must say. My car was left in an open air, mudddy plot of empty land with no security. Thought that was bad? Nope.
Come collection time, I inspected the 'new' rear bumper (which I was promised) and the paintwork. It wasn't up to mark. Mr K convinced me that the new paint takes time to 'settle'. I got in the car, reversed out of that God-forsaken empty land. The reverse sensors sounded different. I concluded that subpar replacements were used and insisted on genuine ones.
Second collection time, said workshop made good on the reverse sensors (sounded like the ones before). However, less than a year later, the paintjob on the rear bumper started to deteriorate and turn yellow (car was Solid White). I had enough of dealing with the 'panel workshop' and decided to pay for a respray with my trusted workshop.
Having shared my encounter with my own workshop, the owner (aka Mr S) decided to remove the entire bumper to give it a proper once over. That was when we discovered that, the rear bumper wasn't new (the broken sections had a generous amount of fibre glue) and worse still, the rear crash bar was MISSING. Not reused, MISSING, as in vanished into thin air.
Can you now imagine, if I continued driving the car, and got rear-ended again, this time without a rear crash bar to absorb the impact?
Why the fraud? It's good money, obviously
WapCar.my sought the insights of Sean Wang, CEO of Allianz General Insurance Company (Malaysia) Berhad about why the industry has such rampant levels of fraud and dishonesty. The answer is pretty simple, it's good money.
Many workshops, in an effort to incentivise tow truck touts to help drive business in, are estimated to offer up to 30 percent commission out of the approved sum for repairs, per case. If the approved sum for repairs cost RM 10,000, that is RM3,000 already, for just one job. Is it any wonder why these touts aka callmen are so rampant?
The problem is, due to the touts' rather high commission, the workshops then have to cut corners in the actual repairs carried out (they still have to make money, right?), and thus their 'cost savings' is passed on to the unsuspecting car owners, like myself at one point.
Just to illustrate the scale of this problem in Malaysia, Sean shares that annually, insurance fraud had become a billion-ringgit scam in Malaysia due to years and years of festering corruption and malpractices.
It is due to the sheer frustration of seeing the industry so entrenched in this flawed system that Allianz decided to shake things up, starting with the introduction of the Allianz Road Rangers (ARR) program. It is a complimentary roadside assistance, and accident service offered to Allianz General Motor Comprehensive policyholders since 2017.
Allianz wants to walk the talk
When I shared my harrowing experience with Sean, he was quick to point out that is exactly the kind of experience that drove him to make changes and weed out the deeply-embedded fraud currently plaguing the industry. Instead of just talking, Allianz went about trying to change things.
Sean says that, at the heart of the ARR initiative, "Humanising our services was important. There is so much talk of digitizing services but human elements come into play when and accident happens and our customers are traumatized.
"It is about showing compassion, making our customers comfortable and taking care of their needs in an unpleasant situation when they are not in the right mind to react properly. It is giving them peace of mind when they are in distress." I couldn't agree more, judging from what I had to endure.
With ARR, Allianz has a dedicated First Responder Bike Brigade team that will be deployed to the accident scene to assist the customer. This could include first aid (responders are trained for this) and rejecting the advances of touts while waiting for an authorised Allianz tow truck to arrive.
The first responders' jobs are far from easy, shares Sean. Many of his team members have had to endure some unsavoury verbal harassment from these touts, to the point of physical harm at times. However, ARR responders are trained not to escalated matters and to protect the customer.
ARR personnel will even guide the customer to lodge a police report and provide an e-hailing voucher to make sure the customer gets home safely. Where was this service when I had my accident?
Of repairs, speed and quality are priority
Central to giving already-traumatised customers peace of mind that their vehicles are going to be okay, Sean says Allianz has put into place many best practices. For example, Allianz has its own yard - which has security and CCTV monitoring - to store cars, instead of a muddy, abandoned piece of land in the middle of nowhere.
To ensure customers' cars are towed straight to the designated location, Allianz's tow trucks are marked and equipped with CCTV. And it doesn't stay there long, as Allianz aims to achieve fast turn-around times. Repairs costing below RM 15,000 are instantaneously approved to get the cars back to customers at the soonest.
You'd think that with such quick turn-around times, the repair job might be shoddy. Not so, as all repairs done by Allianz panel workshops come with a mandatory 2-year warranty on both parts and workmanship.
Mandatory 2-year warranty? Yes, this is one of the criterion set should any workshop want to be part of Allianz's approved panel workshops under the PIAM Approved Repairers Scheme (PARS).
And Allianz practices a very transparent and open tender process (done electronically) to select panel workshops. Currently, no other insurance provider practices such a selection process. More pertinently, no other competitor goes through such a tedious effort.
After repairs are completed, customers will have the option to have their car delivered to their home, office or preferred location (within the specific distance) instead of having to collect it from the panel workshop.
Currently, there are over 196 approved panel workshops in Allianz's network. According to Sean, this is an ideal number as workshops don't have to scrap with each other for jobs, and to prioritise quality over pure quantity. A committee vets and selects the panel workshops biennially, to get new ones on board and to keep existing ones on their toes.
How? Sean shares, "We will issue a warning to a workshop should we receive a valid customer complaint regarding shoddy repair works or faulty repairs. A second complaint will involve a suspension while the third time leads to expulsion from the panel."
Sean continued, "It's no good having 1,000 workshops across Malaysia if they don't have the skills and workmanship quality set by Allianz." Because of this, workshops do not need to rely on tow truck touts to get them jobs, as Allianz has it's own rotation system to ensure fairness.
In addition, because there are no commisions paid out to such touts/middlemen, this will reduce corner-cutting by workshops just to make repairs profitable. Sean remarked, "Paying commissions to touts is just a bad way to do business. Even with the rotation system, some of our panel workshops even remarked that there are too many jobs!"
Quizzed on the perception that independent, non-panel workshops have higher profit margins than panel workshops, Sean had this to share, "Allianz panel workshops on average, have a turnover of over 15 cars every month, so I can speak only for Allianz panel workshops, that they're definitely not shortchanged when it comes to profit margins."
To ensure that all the good work doesn't go unregconised, Sean says that another Allianz best practice is to call each and every customer after delivery to assess and collect feedback on their experience of the claims process, instead of waiting for a complaint to come.
So far, out of a score of 5, Sean notes that the average customer satisfaction score is hovering around 4.7, which is pretty strong. While recognising that his team has done a brilliant job so far, Sean isn't satisfied, as he feels there are more improvements that can be made.
Will others follow suit?
When asked about why isn't Allianz's best practices the norm in the industry, Sean remarked that the onus is on the rest of the industry players to follow suit. The ARR program was borne with the aim of eliminating touts, but Sean recognises that to battle fraud, there must be a collective effort.
Sean did intimate that industry colleagues (he's unable to divulge from which companies) have reached out to pick his brains on Allianz's best practices, of which he was more than happy to share. Of course, to effect such changes requires the top management of these companies to buy in and commit to eliminating underhand practices, which doesn't happen overnight.
To further cement the fact that Allianz is on the right track, Sean also shared that, Allianz counterparts in South Africa and parts of Europe are adopting some of Malaysia's best practices (eg the e-tender panel workshop selection system).
While the fight against insurance fraud in Malaysia is a long and arduous one, what Allianz is doing brings back some semblance of hope that there is someone fighting for the consumers. Sean concluded, "We musn't forget that, we are in the business of protecting our customers. That is why we do what we do."
Claiming insurance to repair your car after an accident, sounds incredibly simplistic fundamentally, but in truth it's fraught with so many obstacles (been there, done that). We can only hope that the Allianz Road Rangers program is the spark that is needed to revamp an industry so deeply entrenched in fraud. Here's hoping.
Jason's foremost passion is all things automotive, where he spent his formative working years as a Product Planner and Trainer. An Advanced Driving Instructor by training and an all-round enthusiast, Jason loves going into intricate details about driving dynamics. Will drive anything with 4 wheels and a steering.