Bank Negara confirms the overall limit for the third-party motor insurance scheme will be capped and the government will act as co-owners of a new company to underwrite third-party injury risks.

BANK Negara Malaysia said it will finalise the revamp of the existing third-party motor insurance scheme by the third quarter of this year before handing it over to the government for approval.

The central bank also confirmed a Business Times report that the overall limit for the scheme will be capped and the government will act as co-owners of a new company (Newco) that will underwrite third-party injury risks.

Its financial sector development department director Abdul Rasheed Ghafur said the government may take a majority stake in the Newco.

Under the new scheme, it was proposed that losses from the scheme would be shared by the government and the industry.

"There will be a formula for how much the insurers will have to pay for the losses in the proposed scheme. Should there be inadequacy in the Newco fund, perhaps there'll be a levy imposed on insurers," he told a media briefing in Kuala Lumpur yesterday.

The restructuring includes a basic motor insurance cover that offers third-party injury and death (TPBID) that will be underwritten by the Newco, and a third-party property damage cover to be underwritten by the insurers.

Individuals who require protection beyond the basic coverage may purchase additional cover according to their needs.

This includes a third-party liability which is a top-up cover for TPBID, theft, own damage as well as passenger liability, personal accident, windscreen, flood and others.

"The proposal is that a basic cover will be made available through the insurance companies and takaful operators, their agents and other existing intermediaries, and no motorist will be denied purchase of the basic cover," Abdul Rasheed said.

He said the proposed scheme was designed to reduce cost and address leakages and the government will remain committed to provide a social safety net for exceptional cases.

Bank Negara had proposed that the overall liability limit could potentially be up to RM2 million per life/injured person.

The proposed cap on the overall limit has yet to be decided, but the idea was to compensate at least 90 per cent of claims.

Meanwhile, Bank Negara corporate communications department director Abu Hassan Alshari Yahaya said the proposal was not definite nor finalised as the central bank was still awaiting more feedback from stakeholders and related parties due by the end of the month.

He said the plan is still rudimentary and details need to be worked out and there was a lot of opportunities for the public to come forward and give suggestions via the central bank's website.

Bank Negara said the industry players have become increasingly selective in providing the TPBID coverage as premiums have not changed for the past 30 years, resulting the industry to lose RM1 billion since 2008.

"In 2008, for every RM1 premium collected, RM2.67 was paid out as TPBID claims without taking into account other related business," he said, adding that premiums for TPBID accounted for only 11 to 12 per cent of the total premiums collected.