THE government has picked three companies with close ties to the insurance industry to provide the online road tax renewal service.

They are Reward-Link.com Sdn Bhd, Financial-Link Sdn Bhd and Financial Information Services Sdn Bhd (FIS), an industry source told Business Times.

This would effectively end the monopoly enjoyed by My E.G. Services Bhd (MyEG) over a potentially lucrative market.

There are about 17 million registered vehicles in the country and about 500,000 new cars are sold each year. The road tax must be renewed every year.

This supports an even more lucrative motor insurance market, worth RM4.4 billion in 2006, which the companies can aggressively tap into. It is mandatory for car owners to have motor insurance.

" The three companies were given the offer letter to undertake electronic road tax renewal (e-road tax) by the Road Transport Department (JPJ) late last month," the source said.

All three companies are due to start offering their services to the public as soon as possible.

It is learnt that each company was offered a 15-year concession period. The three firms are now finalising details of the concession with the JPJ, the source said.

The entry of the three new service providers was announced by Transport Minister Datuk Seri Ong Tee Keat late last month. However, he did not name them.

Ong had said that the move to allow more players was to promote healthy competition to drive down cost and improve the service.

MyEG has been handling electronic renewal of road tax for the JPJ since April this year.

The company said recently that its e-road tax business made up a tenth of revenue and that it could grow to half next year.

It is learnt that the government wants more players to reduce the service charge by MyEG via its kiosk-based system.

MyEG has set up kiosks in selected bank branches to produce road tax discs made of a specialised plastic material.

It is understood that banks offer the road tax renewal service to insurance agents for about RM10 per transaction with half of that going to MyEG.

Insurance agents, who traditionally charge a "runners" fee of RM10 per road tax renewal, are unhappy that part of their income is being eaten by MyEG.

"The government wishes to reduce the RM5 charged by MyEG so that agents will still be able to earn a decent income," the source said.

It is believed that the new players will work with insurance companies directly to renew and collect the road tax at minimal cost.

Two of the new players, Reward-Link.com and Financial-Link, are gateway operators for electronic

cover notes (e-cover notes) between the JPJ and insurance companies.

Reward-Link.com, an associate company of Mesdaq-listed Rexit Bhd, received Bank Negara Malaysia's approval in 2005 to develop, operate and manage the e-cover portal.

Financial Link serves as a one-stop financial hub for insurance companies to offer their services, including the renewal of motor insurance online.

FIS was formed in 1985 to protect and safeguard the interest of its members through the registration of vehicle ownership claims financed on hire purchase.

Its members are from The Association of Finance Companies Malaysia and the Association of Hire Purchase Companies of Malaysia.