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Why Do We Have A Mandatory Scheme

It means that every practicing advocate and solicitor must be insured under one uniform Master Policy and Certificate of Insurance with a uniform set of terms and conditions with an approved Insurer.

Section 78A, Legal Profession Act 1976 sets out the provisions for the Bar Council to maintain a Mandatory PII Scheme.

Adovates and solicitors called to the Bar who intend to practice are required to purchase PII.  The Policy Schedule, which is issued by the Insurer, is one of the documents required when Members apply to Bar Council for their Sijil Annual.
It is based on the 1992 memorandum by the late Dato' Dr Peter Mooney.  The memorandum consists of 8 key elements that laid out the main criteria for the introduction of the compulsory PII Scheme:
(a)   Insurance
All private legal practitioners to be insured.
(b)   Accessibility
Legal practitioners who are qualified to practice should be entitled to insurance in order to carry out their duties.
(c)    Continuity
There would be continuity of cover which is sufficiently wide and of a type and nature that liability could not be unreasonable avoided or repudiated by insurers.
(d)   Fairness
The system of claims handling be fair and reasonable, and allows for the maintenance of professional ethics.
(e)    Interests of the Profession
The Scheme be capable of being monitored in the interests of the Profession with regards the level of premium and as to the type and nature of claims made against Members.
(f)     Confidentiality
Confidentiality be maintained in the matter of individual claims.
(g)   Statistics
Notwithstanding (f), the Scheme was to nonetheless provide meaningful statistics for the Bar, not only for future premium negotiations, but to enable the Bar in years to come to consider the possibility of a mutual fund.  These statistics was also to enable the Malaysian Bar Council to pinpoint areas of risk for the Members; and finally
(h)   Flexibility
If at all possible, for there to be a measure of flexible premium rating to give individual members the benefit of their own past claims experience.
Our present Insurer is Pacific & Orient Insurance Co Berhad.
A Master Policy Scheme provides us with uniformity and purchasing power.  This allows the Bar Council to negotiate a reasonable premium and wider scope of cover, ensuring all Members are insured. Insurers are not allowed to cherry pick the firms they like to insure – they must provide Insurance to all lawyers who are allowed to practice by Bar Council, no matter their size, their area of practice or how adverse their claims history is.
It is not recommended for the following reasons:
  1. There is no guarantee of cover or fall back in an “open market” Scheme.
    If you are refused PII cover by an insurer it would mean no PII hence no Sijil Annual ("SA") and Practising Certificate ("PC").
  2. Further, each firm will have to negotiate their own terms and ensure that they meet the minimum standards set by Bar Council, all within the renewal deadline to obtain their PC.
  3. Each firm will have to ensure compliance at their own costs with the standards set by an insurer.
  4. Insurers will not be keen to reach out to small firms as the premium per lawyer is currently RM1,254 (+SST).  Their focus would be on the larger firms where premiums can be as much as RM100,000 annually!
  5. Insurers can and will dictate premiums based on market conditions and your insurability.
  6. Although there appears to be many insurers to choose from, in reality there are only select few insurers willing to provide PII cover and even lesser likely to be interested in covering 1 to 2 lawyer firms because they will target the larger firms.  In short Insurers can cherry pick!
  7. Researching the market for the right insurer who is financially secure and ‘A’ rated, whether they will be willing to insure you, sourcing for the optimum terms and conditions of cover for your firm’s protection, procure ‘run-off cover’ for your retirement, claims handling and risk management.
Collectively, all of the above will add up to the firm’s time, human and financial resources.  Firms may eventually have to appoint a third party to handle the insurance procurement and manage claims.  Firms on the other end of the spectrum ie those unable to obtain PII for various reasons will be driven out of practice.
No.  In relation to Policy terms, Bar Council reviews and negotiates policy terms annually.  The Bar Council endeavours to determine an equitable and fair set of terms across the board for 20,568 Members as at 28 Aug 2020.  Members’ feedback is considered on scope of cover, grey areas in the policy, improvements, variations and add-ons to cover.

In relation to the approved insurer – Bank Negara Malaysia regulations require that we have a local Insurer issuing the Policy.  The challenge is that the Malaysian insurance market in general lacks the capacity and expertise to underwrite a PII scheme of the Malaysian Bar Council’s size; it requires a high degree of specialisation.  Even in the global market, there are very few reliable reinsurers with the capacity and/or specialisation to Insurer a PII scheme for lawyers.

Strategically, the Malaysian Bar has a panel of reinsurers, each taking a portion of the risk supporting the local Insurer.  The panel of reinsurers are reviewed on a yearly basis.
No, it is not monopolised by one Insurer.  There is a local Insurer supported by a panel of reinsurers.  At each renewal, the Bar Council has the option to change the Insurer/Reinsurers.  The Bar Council also holds an open tender to appoint the insurance broker.
The criteria for selection of the Scheme Insurers are foremost"
  • Financial security (insurer’s rating, stability etc);
  • Good claims payment record;
  • Have portfolio of PII experience in underwriting law schemes; and
  • Have qualified and experienced PII claims personnel who understand the nature of PII claims.
In a PII policy such as this, which is claims-made and where claims can take between 7 to 8 years from notification to resolve, continuity is key!  Long-term relationship with insurers ensures consistency of cover, expertise and claims management.  It also facilitates administration, claims payments, and helps reduce disputes on cover.
Bar Council holds an open tender every 2 to 3 years to appoint the PII Scheme Broker.  This is to ensure fairness and transparency as well as to ensure that we get the highest level of service for the members.  The notice of tender is advertised in a national daily and circulated to Members of the Insurance & Takaful Brokers Association ("MITBA").  After the tender exercise and considering the PII Committee’s recommendations, the Bar Council appoints the Broker.

The broker appointment is usually for a period of two years.  Presently, Marsh Insurance Brokers (Malaysia) Sdn Bhd is the PII Scheme Broker.
  1. To gain unrestricted access to the insurance and especially reinsurance market;
  2. To negotiate and procure the best available terms for the Bar from various Insurers/reinsurers;
  3. To independently analyse our Scheme’s claims statistics including financing actuarial reports; and
  4. PII policy renewals – to provide the man power and IT systems to conduct renewals and attend to our Members’ needs.
Critical areas emphasised are broking services, value added services, ability and past experience in PII Scheme administration, claims management capabilities, IT resources, remuneration, and future proposals.
The tender process is in two stages:
  • First, the brokers submit their written Tender Proposals.
  • Second, the broker gives a presentation to the PII committee and Council Members.
The PII Committee and Bar Council decides on the selected broker based on the above criteria.  As mentioned, emphasis is placed on key areas of the PII Scheme ie broking services, administration of the PII Scheme, claims management, risk management and more recently, experience with self-insurance schemes.
The Bar Council PII Committee is responsible to study and review the efficiency of the current mandatory PII Scheme and negotiate new and better terms to make the Scheme more equitable across the board.  The Committee is committed to improving the Scheme to maintain its sustainability and affordability, and to provide comprehensive coverage for Members of the Bar.

A quick summary of the role of the PII Committee:
  • Oversees the PII Scheme and the broker's services in general;
  • Together with the Broker, negotiates with the Insurer for better terms and policy coverage;
  • Develop policies and guidelines pertaining to the PII Scheme; and
  • Develop risk management programmes to complement the PII Scheme.
The Bar Council PII & Risk Management Department assists and supports the PII Committee's objectives.  The department also attends to Member's enquiries and ensures that Members have access to reliable information on PII and risk management.
Last updated 11 Apr 2019.