by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Petaling Jaya on Saturday, 21st May 1994:
DAP calls on Finance Minister, Anwar Ibrahim to honour his undertaking to all policyholders when announcing the Bank Negara takeover of Mercantile Insurance in March 1991 that “business would as usual”
DAP calls on Finance Minister, Datuk Seri Anwar Ibrahim to honour his undertaking and assurance to all Mercantile Insurance Sdn. Bhd. (MISB) policy holders and the public when announcing Bank Negara takeover of MISB in March 1991 that “business would contine as ususal”.
The sudden announcement by Bank Negara on Tuesday ceasing all Mercantile Insurance business activities and suspending all payments to claimants and creditors is a double breach of trust to the affected 263,000 policy holders – first, that of the undertaking given by Anwar Ibrahim in March 1991 and secondly, the trust of the policyholders in Bank Negara takeover of MISB in buying and renewing their insurance policies in the past three years.
On 29th March 1991, Anwar Ibrahim gave the assurance that the take-over of Mercantile Insurance by Bank Negara was to “safeguard the interests of policyholders and creditors” and that “business would continue as usual”.
A week later, on 4th April 1991, the accounting firm of Samad & Co., which was appointed by Bank Negara to manage the assets and affairs of Mercantile Insurance, also gave a public assurance that Mercantile Insurance had enough funds to pay all claims and assured Mercantile agents of the company’s financial stability.
The new managers of Mercantile Insurance appointed by Bank Negara said that some people had asked to cancel their policies and the Mercantile agents were urged to reassure them that Mercantile Insurance “can and will undertake to meet its obligations”.
How can Bank Negara now let down the 263,000 MISB policy holders who would not have bought or renewed their insur¬ance policies with Mercantile Insurance in the past three years, if they bad not put their trust in Bank Negara and Anwar Ibra¬him’s assurance in March 1991?
Bank Negara has explained that all MISB insurance policies are still valid, and that it had only advised all MISB policy holders to terminate their policies with Mercantile in order to safeguard their interests in the event of future claims which would be honoured 70 sen on each RM1, and not dollar for dollar.
How is Bank Negara safeguarding the interests of the Mercantile policyholders when it is not prepared to honour dollar to a dollar, but would only pay 70 sen on each RM1?
Bank Negara cannot pretend that it does not know that it has created enormous inconvenience and hardships to the 144,000 motor policy holders out of the 263,000 Mercantile policy holders, as it was not too long ago when motorists were forced to buy additional insurance policies before they could purchase motor insurance policies.
This was because Bank Negara had at that time directed insurance companies to balance the high volume of motor insurance in their business with non-motor insurance portfolios – and motorists were compelled to buy non-motor insurance policies before they could buy motor insurance policies.
It is no comfort to the 263,000 Mercantile motor policy holders to learn that after three years of take-over by Bank Negara, the Director-General of Insurance who is also the Bank Negara Governor had decided that “in view of the adverse financial position and as a matter of prudence”, Mercantile Insurance should be wound up unless the shareholders could inject new capital of at least RM383.4 million to rectify its solvency deficiency.
Mercantile agents, after the 1991 takeover by Bank Negara, for instance, were directed to have a 70:30 ration for motor and non-motor insurance instead of the previous ratio of 90:10.
Had Bank Negara’s takeover and management of Mercantile Insurance been adversely affected by Bank Negara’s preoccupation with its RM30 billion foreign exchange losses scandal since 1992or even earlier?
Bank Negara had indicated after the takeover of Mercantile Insurance in March 1991 that it would a few months to get to its root problem, and that Mercantile Insurance was in safe hands after the takeover as its large nubmer of policyholders, numbering some 500,000, offered good money premiums.
If Bank Negara had decided by end of 1991 that Mercantile Insurance was so rotten that it had to cease all business, it would be understandable. But what is not understandable and, even excusable is why Bank Negara had taken more than three years to decide to stop all Mercantile Insurance business?
This raises the question of Bank Negara competence and professionalism after the takeover of Mercantile Insurance: Has the Bank Negara’s takeover and management of Mercantile Insurance been adversely affected by Bank Negara’s preoccupation with the RM30 billion Bank Negara foreign exchange losses scandal since 1992 – and probably even earlier?
Bank Negara owes the 263,000 Mercantile policyholders and the public a full account as to how it had managed Mercantile Insurance since its takeover for over three years.
Bank Negara should also explain how Mercantile Insurance had reached such a deplorable state of financial affairs in March 1991, as the Chairman of the Board of Management of Mercantile Insurance before the takeover was none other than Datuk Lew Sip Hon, former MCA strongman and Deputy Minister.
The 263,000 Mercantile policyholders should organise themselves to protect their rights and interests, for they are the real victims in the whole scandalous episode.