Effective January 16, the motor tariff premium rates in the country are set to be revised on a gradual basis, according to a Bernama report. Bank Negara Malaysia (BNM), which issued a statement on the matter, said that the revision will be the first to be carried out in over three decades, adding that the premium adjustment was to be in a small amount and implemented over a period of four years.

For example, third-party cover on motorcycles of 110 cc will experience a premium increase of between RM1 to RM3.50 per year over the next four years. For a private car of 1,400 cc, the premium adjustment will be between RM6 to RM34 per year over the same period.

As for commercial vehicles such as outstation taxis and buses, the impact of the premium adjustment on the passengers will be minimal, at less than 10 sen per passenger per trip.

The tariff revision is part of the New Motor Cover Framework, which addresses the structural issues within the motor insurance and takaful sector. The framework also involves an immediate implementation of critical measures to enhance efficiency in claims settlement.

The central bank said that the adjustment in the tariff is to be reviewed periodically in order to ensure that the adjusted premium rates continue to be reflective of the claims experience, and assured that the implication on the public and businesses will be marginal.

It stated that the current tariffs, which have not been revised for more than 30 years, have been a major source of difficulties faced by the public in recent years – while premiums have not been adjusted, there has been a significant increase in the level of car ownership to about 19 million to date, and with it, a corresponding accident rate and claims. The enhancements will significantly reduce the average claims settlement period to six to 18 months from the present one to five years.

The framework will pave the way for the detariffing of motor insurance premiums in 2016, in which premium rates will be further differentiated in accordance to the risk profile of individual vehicles and fairer to vehicle owners, as those with good claims experience will enjoy much better premium rates than those with a higher risk profile, BNM added.