Press Statement(2) by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Petaling Jaya on Thursday, 23.4.1987:
Is the next scandal in Malaysia a $500 million Insurance Scandal?
Deputy Finance Minister, Sabarrudin Cik, told the Malay Mail today that the Director-General of Insurance had issued a directive to all insurance companies to stop giving financial guarantee for loans undertaken by clients or face appropriate action.
Datuk Sabarrudin claimed that the Finance Ministry was made aware of the practice of insurance companies providing financial guarantees for loans undertaken by clients only recently, when it queried three insurance companies on their poor cash-flow positions.
If the Finance Ministry had only recently discovered the problem of insurance companies engaging in unauthorized practice of giving financial guarantees for loans for clients, then the Finance Ministry must be the most incompetent and inefficient Finance Ministry in the nation’s history.
This is because the possibility of the insurance companies becoming the next subject of the nation’s financial scandals had been a matter of concern for about a year, and there is no reason why the Finance Ministry does not know what is public knowledge in political and financial circles for close to a year!
I understand that the total guarantees given out by the insurance companies to loans could be as high as $50 million, and the people of Malaysia are entitled to ask whether after the BMF scandal, the UMBC scandal, the MAMINCO scandal, the Perwira Habib and UAB scandal, the co-operative financial scandal, Malaysians are going to be hit by a $500 million insurance companies scandal?
I also understand that many important personalities with Barisan Nasional connections are involved in the loans for which the insurance companies stood guarantee, and that the loans were based on assets which were grossly over-valued.
Whatever statements the Minister and Deputy Minister of Finance may be making these few days, the Finance Ministry cannot escape responsibility if the country is hit by another financial scandal, in the from of a $500 million Insurance Company Scandal.
Public fears that insurance companies may face financial difficulties or even liquidation if they had to pay the banks for loans which it had stood guarantee, and which had been defaulted by the borrowers, are legitimate. It is no business of insurance companies to stand guarantee for bank loans. For a start, the government must fully release to the public the total amount of loans which all the insurance companies in the country had stood guarantee. All insurance policies-holders are also entitled to an assurance by the government that they will not suffer any losses from any mismanagement by insurance companies, in the way the 588,000 depositors had been allowed to suffer as a result of the co-operative finance scandal.