Motor insurance liberalisation and what to expect

WITH the motor insurance industry having been recently liberalised more than six months ago, consumers are definitely eager to the goodies that entails them.

Helping to clear some of the air, we spoke with General Insurance Association of Malaysia (PIAM) chairman Antony Lee about what the general public should expect.

“If it all goes well, we might see the motor insurance industry become fully liberalised by 2019 and by then, people will need to be aware and get used to paying according to risk,” said Lee.

“And with another five more months to go, there’s going to be more people beginning to experience their annual renewal process and it’s then that they’ll know if this new scheme will be more or less affordable for them.”

In terms of affordability, the cost of an individual’s motor insurance will be based upon the insured’s risk profile.

“When we did our projections we estimated that half will see some price increase and may not be so happy and then there will be those who will experience a discount from what they usually pay.”

PIAM’s goal right now is to help people understand more about what they are paying for, which is all about their risk profile, or in layman’s terms - how frequent one gets into a fender-bender to say the least.

Following the liberalisation of the motor insurance industry from July 1 last year, the amount of premium a person pays will be determined by risk factors which may include a driver’s age and gender, the vehicle’s age, claims record and even traffic violation history.

On the matter of gender, studies in developed countries showed that women generally have safer driving habits than men.

This means drivers with a lower risk profile enjoy lower premiums.

The days of ‘blindly’ signing that standard motor insurance policy have become a thing of the past with more people being required to read the ‘fine print’ before penning their signature in agreement.

“We are getting more people asking questions and that’s a good thing because we want people to keep asking them, so it’s important for them to read their policies and shop around for the best deals,” Lee said.

Undoubtedly, many will find motor insurance policy details hard to understand and there’s going to be a learning curve.

“PIAM has helped to simplify the terms used so that everyone’s on the same page and there’s no other way of interpretation.”

But how much will people be paying based on their risk profile?

“This first phase that we’re in is essentially a price range that we can operate and if we want to operate beyond that range it will require a lot of justification for Bank Negara Malaysia (BNM) to approve and if it all goes well they could open up the market a little more. That’s the plan and we’re working very hard to achieve it,” Lee said.

BNM felt that a phased-liberalisation approach would be best to allow the industry and the general public some time to adjust.

“As the industry begins to open up, insurance providers are now scrambling to ensure they get a bigger piece of the pie and because BNM has phased it, there’s now more competition and more insurance companies doing campaigns for branding purposes in an attempt to try and make more people better aware about the need for insurance,” he said.

To attract more clients, insurance companies have been ‘bundling’ more into their plans.

“Although it does mean that insurance buyers will need to pay more, the value for money is obviously much higher.”

In the past, with the tariffs in place, motorists have often never read their policies and now, suddenly, they’ll need to do some ‘studying’ and learn the terminologies.

“We are trying to simplify these terminologies to help people understand them better.

“At PIAM, we have a board that looks at standardising certain words so that people don’t get confused, but these are legal terms so unfortunately they will need to learn some of them,” he said.

For more “complicated words”, PIAM have gone to great lengths to provide an explanation, which can be found on its website, so that people can get a better understanding of what they’re reading.

This is to ensure that insurance companies cannot say one thing, but mean another.

Then there’s also the issue of price. “People can go for the cheapest policy, but they shouldn’t expect it to provide a lot of coverage, so they need to ‘shop’ around for what suit’s them best in terms of coverage and ask plenty of questions. It’s worth doing some homework for this,” said Lee.

In the end, what matters most is that the person ought to know the ins and outs of a policy before agreeing to it.