As a result of the ongoing tariff liberalisation for motor and fire insurance, consumers are benefitting from new and improved products offered by insurers or Takaful (Islamic insurance) operators.
Malaysian Takaful Association (MTA) chairman Muhammad Fikri Mohamad Rawi said the increased competition between insurers and Takaful operators has resulted in more products that meet the needs of consumers at affordable and flexible rates.
“However, at the moment, insurers and Takaful operators are still collecting customers’ data before promoting products that can give them the competitive edge,” he said.
“The new products are for all and not just for good drivers to enjoy these added benefits. With these new products, the standard benefits have been improved in line with liberalisation,” said Muhammad Fikri.
The list of new products offered by insurers and Takaful operators are available on the PIAM (General Insurance Association of Malaysia) and MTA websites, in the Motor Product Selector sections.
The links are http://www.piam. org.my/phased-liberalisation-section/motor-product-selector/ and http://www.malaysiantakaful.com. my/Phased-Liberalisation/MotorProduct-Selector.aspx
Phase Two of the framework on phased liberalisation of Motor and Fire Tariffs (whereby motor insurance for comprehensive cover and third party fire and theft will be detariffed) commenced from July 1 last year.
Thus, insurance premium rates will depend on the risk profile of vehicles and owners.
Vehicle owners with a good claims record and better risk profile will pay a lower insurance premium than those in a higher risk bracket.
Risk factors that will determine insurance rates include vehicle age, driver’s age and occupation, vehicle model, safety features, vehicle maintenance records, traffic summons, and even vehicle location (theft prone areas).
This system has been used in many countries including Britain.
However, the tariff liberalisation for motor and fire insurance in Malaysia is being conducted in phases to ensure market stability.
Any revision of the price of comprehensive motor insurance premiums by within a band of more or less than 10% from current prices would need the approval of Bank Negara.
In a report, Kenanga Research noted that “there are in fact not much of premiums revision seen thus far among the new motor insurance products, thanks to the risk-based capital framework in place as well as the already thin margins on motor insurance.
“The feedback from the public regarding the ongoing liberalisation has been positive.
“This may be due to the movement of motor insurance or Takaful tariffs that are still subjected to limits set by Bank Negara Malaysia which shall not exceed 10%,” said Muhammad Fikri regarding the joint campaign on the awareness of the liberalisation of insurance and Takaful motor, carried out by the PIAM and MTA.
He pointed out that the tariff liberalisation would also improve road safety as good drivers would benefit from “rebates, tariff discounts and so on.”
“Disciplined drivers will receive a fair price, compared with the bad drivers. On the other hand, drivers who have higher risk profiles would not welcome the tariff liberalisation as they may be forced to pay more motor insurance or Takaful rates.
“It’s time for this change in liberalisation to foster more good driving habits and also ensure vehicle safety and security features are among the factors that determine the motor insurance or Takaful rate,” said Muhammad Fikri.
Phased liberalisation will also drive innovation in the motor insurance industry.
“We also recommend users to make comparisons of insurance or vehicle Takaful rates via the PIAM and MTA websites. Previously, users did not need to compare prices/tariffs as tariffs were set according to vehicle market prices and engine volume (cc),” he said.
“Users must compare the protection provided to ensure their risks are fully protected according to their respective needs.”
PIAM and MTA will continue to carry out activities to create more awareness on the motor insurance industry.
Muhammad Fikri also said benefits of the phased liberalisation for all motor insurance buyers include increased service quality and more diversified product range at competitive prices, due to competition among insurers and takaful operators.