The Phased Liberalisation of the Motor and Fire Tariffs announced by Bank Negara Malaysia (BNM) in June last year is a game changer for the insurance industry, and detariffication will impact almost everyone – those with home loans, vehicle owners and business owners nationwide. It’s a major shift for the insurance industry, as motor and fire classes account for 65% of the general insurance market.
In the very near future, how much one pays for insurance will no longer be determined by fixed price lists, but by his or her risk profile. This risk-based assessment is already present in many countries, and it “rewards” those who are perceived to be low risk with lower premiums, vice versa. It is hoped that this will incentivise consumers to improve their risk profile. There will also be increased competition among insurance companies, which will be free to adopt market-based pricing.
The first phase started in July 2016. “In the first phase of liberalisation which started from July last year, insurers have been allowed to introduce new motor and fire products, and price them at market rates. These new products are subject to a review of the policy wordings, definitions and terminologies by PIAM to ensure consistency and avoid confusion among consumers. Subsequent approval from BNM on the pricing is required before the products are launched to the public,” General Insurance Association of Malaysia (PIAM) CEO Mark Lim explained.
The second stage, which will start from this July, will see rates for Motor Comprehensive and Motor Third Party Fire and Theft products liberalised. The central bank opines that current rates for comprehensive motor insurance are close to technical market rates, and there should be no sharp adjustments once the tariffs are removed.
However, Motor Third Party insurance will continue to be regulated, as this segment is currently “substantially underpriced” and immediate detariffication will result in a sharp price hike. Payouts are higher than premiums collected (for every RM1 of premium received, insurers are paying between RM1.30 to RM3.00 in claims, PIAM says) and current prices are unsustainable in the long term. Expect a gradual increase in prices for third party insurance.
The association has pledged to work closely with BNM to ensure an orderly transition to a liberalised environment. Shopping around and comparing motor insurance products with different prices and features will be alien to consumers, which makes education key.
According to PIAM chairman Antony Lee, a National Consumer Education Campaign will be rolled out soon to raise awareness on the phased liberalisation with focus on its objectives, benefits and expected outcomes.
Lee, who is also CEO of AIG Malaysia, added that it would be important for consumers to be aware of their insurance needs and risk priorities so that they can make informed decisions given the wide choice of products and covers. Consumer engagement and empowerment will be the key differentiating factors in an open and highly competitive marketplace, he said.
Speaking to reporters at PIAM’s 2016 industry results media briefing yesterday, Lee said that a possible challenge facing insurers when detariffication happens is if consumers simply opt for the lowest priced product without taking into account the amount of cover. Price driven consumers must remember that “you get what you pay for,” he said, adding that if all goes well, full liberalisation will happen in 2019.
More details will be needed, especially in the risk assessment part. What’s certain is that it’s interesting times ahead for both the industry and consumers.
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Ask the insurance industry first to clean up their dirty false claims first. Every car involved in an accident has false claims made up to 10x the original value. This is costing the industry tens of billions.
Why don’t you guys sort out your false claims first? IT is all internal job. All involving adjusters, polis officers and worksyops pakat pakat.
Now you pass this burden to the consumer?
With increase in third party premium, that would get rid of those 20+ year old junks from the road, thereby reducing jams…this is good
PIAM should close down. they cannot even contain or control their own fraud.
How many 20+ year old cars you see stuck in jam?
Its not the car, its the driver
No use driving R35, M5 or GTi if driving slow on the speed lane
New VWs cost more jams on road becoz they break down more often than 20+ year old ‘junk’ wiras and iswaras!
With increase in third party premium, that would get rid of those 20+ year old junks from the road, thereby reducing jams…this is good.
Yea!!!
Do you have proof for this? Else this is sedition
Not really. This has nothing to do with the fraud, though you are correct that it is rampant. The point here is to reward careful law-abiding drivers and penalise those with bad records. If you are careful, your premium should decrease. Now those with 10 summons for beating traffic light, speeding etc are paying the same premium as those with 1 summon in 10 years. Complete systemic failure.
if you are panel bengkel, you can make millions per year. Just do even 10 or 20 cars a month also cukup.
Each one hantam about 5X. Buta buta profit 500%
Repair BMW even better. Bill RM10k, can claim RM50k. 1 car untung RM40k
Car prices highest in the world.
Fuel prices one of the highest considering oil producing nation
Now insurance also very very high. I compared with my buddies in Australia and UK, Malaysia car insurance is way way way higher.
They shud oso add other criterias to up risk factor such as not paying samans, frequent law breaking, and making themselves femes in utube for harassing enforcement officers & blocking emergency vehicles.
This new system which will raise tariffs and premiums is because Insurance companies cannot sort out their own fraud which they know exist.
To all the insurance companies, pls don’t pretend to be innocent. You all know damn well that every adjuster of yours is working hand in hand with the police, investigation officer and the car workshop to get kickbacks. I myself had many accidents.
Infact the last accident I had, I sent my car to my own friend workshop, he said he will repair everything for RM1000. I tried another workshop, he assessed the repair to about RM1200. I thought, nevermind, I will send for insurance claim and I can save the RM1000.
So, I sent the car to the panel workshop. After repairs and all that, out of curiosity, I simply called the insurance company up to find out how much was the bill, it was shockingly RM8000. Yes, 8x the actual amount if I had the car repaired by myself.
We all know what happens. The IO (Investigating Officer), the Adjuster, as well as the bengkel and the ulat ulat runner boys will get their kickback. Biggest kickback would be the adjuster. At least he makan few thousand for his personal pocket.
The Insurance companies know about all this. Hundreds of cases happen everday. But they close an eye. They pass the problem and burden to the consumer with higher premiums.
BNM, you know this happens but you too close an eye. This results in higher burden and premiums for the public and now, this new system, which is utter bogus.
Bank Negara, please read the above. I repeat, you also know about all this. But BNM just keep quiet. You all just close an eye because the problem now goes back to the consumer with higher premiums.
With all this shit going on the Insurance industry dare to increase the car premiums for the motor industry every year and now, do this system which will make them more money.
That is Malaysia for you. The rakyat suffer the most because there is no proper enforcement and the insurance industry is full of cheats.
Everybody suffers when everybody along the line gets kickbacks from the police office, the police cameraman, the adjuster, the bengkel and the runner boys (ulat ulat).
The Motor Insurance Industry collected no less than RM100 billion in premiums last year. It is not fair that we public have to pay higher premiums because they cannot sort out the fraud in their own backyard.
Man, u should report this to MACC..let the truth be told.
But provided hes telling the truth-lah! (LOL!)
what a low life comment. We all know the fraud that occurs
still sweeping things under the carpet. This is the problem with our country
Boring, comment from same guy under different name
Boring Samy, you support corruption? IT affects everybody bro. Everybody now have to pay more in premiums.
If u have proof (so u claimed), pls repot to MACC. Otherwise ur just hypocrite & lyin here. And ranting and raving here dun help.
I am sure many have reported. But NFA. No further Action. All tidur.
PIAM dare to comment on the above?? I have seen this happen to me as well
how about u stop paying so much to insurance agents?
Who ask to use agents? I go direct to the insurance company and save the 10% fee. Same should apply to obsolete property agents, Mutual fund agents etc
cakap je la nak naikkan lagi harga insurans… #%@£&–%-&—&-%%£6-+!!!
new system insurance will be much higher than what we pay now. Cause everyone also they will say high risk. Old man with heart problem got to pay double now for sure
Insurance rates should be based on merit system whereby those who have been frequent claimers should be charged a higher rate. And as for those who are more careful and have ‘0’ claim experience should be rewarded with lower rates. This will have a direct impact on reckless drivers and will serve as a gauge to remind them to be more responsible on the road.
bla bla bla bla bla……insurance tariff naik..end of story…….capitalist
The industry need to be transform …. be more transparent with full integrity. The external auditors should be able to see thru’ those hanky-panky claim. The current system was made to be abused
You pay peanut you get monkey don’t you.
dun forget the ulat2, important team players
This is good. But must be based on actual risk history, not assumptions. In developed countries, young males and senior citizens are charged exorbitant rates based on assumptions on behavior making it uneconomical to buy a car. The risk rating should only be raised in the event of causing an accident, summons, bad behavior, actual historical events.
But I thought u pipus says we shud follow developed countries….
So what happens to our NCB?
tak habis2 nak suruh org kluar lagi byk duit…