KUALA LUMPUR – As the Bar Council election approaches at the end of the month, lawyers are actively debating indemnity schemes, a key point of contention this polling season.
Speaking to Scoop, former Bar Council president Kuthubul Zaman Bukhari highlighted that a group of 16 candidates is advocating for the implementation of a self-indemnity fund (SIF) scheme.
Under Section 78A of the Legal Profession Act, the Bar Council is authorised to establish rules concerning professional indemnity for lawyers. This provision allows the professional body to either adopt an insurance scheme or approve the creation of a fund for such purposes.
At present, the Bar Council relies on insurance to protect lawyers against civil liability, explained Kuthubul.
“Over the years, we have faced several problems regarding the insurance premiums.
“We realised we can’t control the premiums. So in 2008, a committee proposed the SIF scheme to overcome this.
“Following which, a resolution on the matter was passed and (the SIF scheme) was supposed to be implemented by 2010,” Kuthubul told Scoop.
However, a major challenge to establishing the SIF at that time, according to Kuthubul, was the lack of initial funding.
By 2019, at least RM25 million had been accumulated in the fund, Kuthubul said.
“So when it comes into play, lawyers can choose whether to opt in to the SIF or the current personal indemnity insurance (PII).
“The PII is subject to external factors which we can’t control. But the SIF we can have control.
“So it gives lawyers a choice,” Kuthubul added.
In contrast, lawyer New Sin Yew, in a statement, expressed concerns about what he termed as “misinformation” surrounding the premiums and the SIF scheme promoted by its supporters.
Sin Yew pointed out that while proponents suggest lawyers would pay RM600 annually—less than the current RM1,000-plus premiums—this could be detrimental to the fund’s viability.
“To understand these numbers, a simple explanation of the loss ratio is required.
“If the average loss ratio per annum is around 50-60%, it means for every RM1 collected, 50-60 cents are paid out in claims.
“The premium collected for 2025 is about RM1,000 per lawyer. Assuming an average loss ratio of 60%, it is expected that RM600 out of the RM1,000 would be paid out in claims,” Sin Yew said.
He explained that if the SIF premium rate is set at RM600, this could result in an average loss ratio of 100%, risking fund depletion over time.
Highlighting the cyclical nature of claims, Sin Yew emphasised there are no assurances that adverse years will not recur.
“For example, in 2014 the loss ratio was 76%, in 2015 it was 92% and in 2016 it was 76%.
“Claims are cyclical and no one can guarantee that bad years will not happen again.
“Just using these numbers and at RM600 per lawyer would result in the SIF failing,” Sin Yew added.
Lawyer Kuhan Manokaran echoed Sin Yew’s caution, stressing that any indemnity scheme must ensure the premiums collected are commensurate with the anticipated risk and operational requirements of the fund.
“The focus on an actuarial basis is essential for prudent financial management.
“While some calls for premium reductions are appealing, sustainable protection for lawyers and their clients must take precedence,” Kuhan added.
A recent Malaysian Bar publication indicated that 42 candidates are competing for 16 seats on the Bar Council for the 2025/2026 term.
Approximately 24,000 members of the Bar are eligible to vote in the upcoming election.
All completed ballot papers must be submitted by 30 November, with the newly elected council set to assume office in March 2025. – November 13, 2024