Top 5 Things You Should Know About Motor Detariffication in Malaysia
Detariffication in Malaysia has been a hot topic for Malaysian insurance companies since year 2015. On the contrary, many Malaysians are still unaware that come 1st July, 2017 when detariffication starts, their Motor and Fire premiums will be charged differently.
However, it has to be within a controlled limit in +/- 10 percent from a basic premium. This is regulated by the Bank Negara Malaysia (BNM) to ensure that a gradual adjustment to Motor tariff rates for both Motor comprehensive and Motor Third Party Fire & Theft policies in Phased Liberalisation of Motor and Fire Tariffs.
Having said that, detariffication in Malaysia means insurance companies are expected to innovate and offer a wider range of Motor and Fire products to cater for different consumer needs and preferences. As a consumer, you can expect a wider range of Motor and Fire insurance products to cater for your lifestyle needs, along with preferred channel to purchase Motor and Fire Insurance protection and higher quality of services provided by agents.
1. What Is An Insurance Tariff, Particularly Motor Insurance Tariff?
In past 30 years, Motor insurance premium in Malaysia follows a Tariff structure and has been controlled by Bank Negara Malaysia. The method of calculation is based on the two main factors, which are Market Value of the vehicle and Vehicle engine capacity (CC).
Because the method of calculation is the same across all insurance companies and is according to the vehicle you drive, the premium you pay is similar no matter which insurance company you buy from, with a small difference sometimes.
This difference is mainly due to vehicle sum insured, packaging of different add-ons in their main Motor policy i.e. Personal Accident (PA), and different companies may have different loading conditions based on vehicle’s risk i.e. vehicle aged 10 years and above may have loading.
2. What Is Motor Detariffication In Malaysia?
So first things first, what is Motor comprehensive again? Well, Motor Comprehensive insurance covers your car against liabilities to other parties for death or bodily injuries, damages to other parties’ properties, accidental or fire damages to your car and theft of your car.
Then what about Motor Third Party Fire & Theft? Well, Motor Third Party Fire and Theft insurance covers your car against liabilities to other parties for death or bodily injuries, damages to other parties’ properties, fire damages to car and theft of your car.
Therefore, motor detariffication in Malaysia stands for removing Tariff. Bank Negara will no longer control motor comprehensive and third party fire & theft insurance premium or the method of its calculation under motor detariffication in Malaysia.
Insurance companies are free to use their own methods to calculate premium and expected to implement risk-based pricing method. Insurance companies will maintain a list of risk factors as part of their premium calculation formula for Motor insurance.
This can be sum insured, gender, location, car summons, number of claims, and more. For instance, a female driver may get a cheaper premium rate because women are much more careful than men in general.
Besides, price is not the only the factor that will be influenced by motor detariffication in Malaysia. Insurance companies are expected to introduce more personalized new products to the consumer to be competitive. On one hand, a better quality of services will be offered to the consumer by insurance companies and agents.
3. What Does Phased Liberalisation Of Motor And Fire Tariffs Mean? Is It The Same As Motor Detariffication In Malaysia?
Yes it is! Phased approach is Central Bank’s initiative to deregulate the pricing of Motor and Fire products through the gradual disapplication of requirements under the Motor and Revised Fire Tariff (both Motor comprehensive and Motor Third Party Fire & Theft policies).
The entire implementation will be carried out in different phases and 1st July, 2017 was successfully roll-out recently in phase 2. The progress and impact of the phased liberalisation will be evaluated to determine the readiness of consumers and the industry for further liberalisation from 2019 onwards (in phase 3).
4. The Role Of Consumer?
Insurance company is given a broader flexibility to price your insurance premium according to individual’s risk profile.
Moreover, they will start to introduce a variety of new products with different coverage and benefits. Some tips and tricks to renew your insurance policy.
First, you need to read and understand the policy terms and conditions stated in policy wordings by differentiating what is mandatory and optional coverage.
Secondly, seek clarification if you identified any difference in an insurance coverage or found that it is more expensive.
Third, shop around for the best deal. Compare prices among companies to find one that offers the best price along with the best product and services. Shopping the best deal doesn’t necessarily mean cheapest deal!
5. Safe Driving Behaviors For Cheaper Insurance Premium?
Following motor detariffication in Malaysia effective 1st July 2017, insurers are free to design their products and also expected to price according to insured’s individual risk profile i.e. age, gender, sum insured, location or driving behaviors.
The technology would help drivers better understand their driving behavior through installation of a special tracking device and/or use of mobile application in an insured vehicle.
Telematics is a combination of the words telecommunications and informatics. By adopting telematics, insurers can monitor the real-time driver behavior data commonly measured in terms of braking, acceleration, cornering, speeding and phone use.
For example: good driver will be rewarded with premium discounts at next policy renewal. Some of the Malaysia Telematics solutions are iFleet by Digi Telecommunications, Advance Telematics by Katsana, and FlexiDrive by Axa Affin.
We hope that you’ve now have had a glimpse of what motor detariffication in Malaysia is all about, and are now well equipped to decide which car insurance is best for your needs.
PolicyStreet has recently partnered with AXA to launch their motor insurance. It is arguably one of the most affordable car insurance out there right now, and we hear that there is a special limited perils cover (which also includes flood cover) you cannot get from any other insurance companies! Uniquely AXA!