Citation(1998) 10 SAcLJ 456
Published date01 December 1998
Date01 December 1998

To appreciate this it will be useful to take a look at the first Motor Insurers’ Bureau (MIB) which was established in Great Britain in 1946. This became the model for Hong Kong, Malaysia and Singapore when these countries decided to establish their MIB. The reason is simple — these countries have basically the same laws and same legal systems as the British, one being a British colony and the others being former British territories who had imported and retained the laws and systems of the British when they became independent countries.

The MIB as first established in Great Britain and still in operation was set up as a central fund financed by all motor insurers to make compensation to road traffic accident victims who for some reason were unable to recover such compensation from any other source. Thus, the MIB is a social scheme set up for the benefit of the general population some of whom might be unfortunate to fall victim to traffic accidents and were unable to obtain compensation.


Compulsory third party motor insurance was introduced in Great Britain under the Road Traffic Act, 1930. By this law all motor vehicle owners/ drivers (except vehicles owned by the Crown) must obtain insurance to cover their liability for personal injury or death caused to a third party arising out of the use of the motor vehicle. Their liability to a third party is based on the English common law system of tort liability. Simply stated, this means that if a motor vehicle owner/driver commits an act of negligence resulting in death/bodily injury to a third party, he is liable to pay compensation to the third party according to the degree of negligence. The motor insurer who insured the owner/driver is then called upon to pay the compensation on behalf of the insured. While this compulsory insurance law went a long way to ensure that victims can recover damages awarded to them by the courts, there remained many instances where the victims were unable to obtain compensation. These instances were:—

  1. (a) where there is no insurance cover in existence at the time of accident;

  2. (b) where there is an insurance policy but the cover is ineffective for various reasons, such as, the vehicle being used outside the scope of the policy coverage, breach of condition, unauthorised driver, etc.; and

  3. (c) where the driver could not be traced — a “hit and run” case.

Such cases would fall within the ambit of the MIB and the victims would be compensated by the MIB.

In addition to these, the MIB would also meet any judgement which was not satisfied because the insurer concerned had become insolvent.

The first Agreement which was signed in 1946 did not include “untraced drivers” or “hit and run” claims but the MIB gave sympathetic consideration to such cases. It was only in 1969 that this was formally incorporated into the Agreement.

(A) How does the MIB operate?

The MIB is a corporation registered under the Companies Act and all insurers transacting compulsory motor vehicle insurance were required to be members of this Corporation.

The MIB as a corporate body then entered into an agreement called the Principal Agreement with the Minister of Transport, the obligations of which are essentially to satisfy any judgement which is not satisfied by any insurer and to pay compensation to victims of untraced drivers.

Simultaneous to signing the Principal Agreement, all members sign an agreement called the Domestic Agreement with the MIB, the underlying purpose of which can be better understood by the following explanation:—

(B) Underlying Purpose of the Domestic Agreement

Under the terms of the Principal Agreement, MIB is required to meet unsatisfied judgements in respect of liabilities imposed by the statute prescribing compulsory third party motor insurance, i.e., Act liabilities. Where there is no insurance the claim is obviously one for the Central Fund but different practical considerations apply where there is an insurer who for one reason or another would have been entitled in law to refuse an indemnity in respect of a claim.

In theory there is no distinction between the two categories referred to above, and technically both give rise to MIB claims. All payments under the Principal Agreement have to be financed by MIB members in one way or another and it is merely a question of how the burden is...

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