MOTOR INSURANCE OVERHAUL
Motorists may end up paying more or less for insurance premiums. Come July 1, Bank Negara Malaysia will allow insurers to charge premiums based on a vehicle's safety features, time on the road, location and a driver's traffic offences record, among others
EFFECTIVE July 1, more risk factors will be taken into account in determining motor insurance premiums. Under the more liberalised environment from July 1, insurers can take into account the vehicle’s safety and security features, duration on the road, geographical location and traffic offences record to determine premiums.
This is on top of existing factors, namely the sum insured, vehicle engine cubic capacity and age, Bank Negara Malaysia (BNM) announced yesterday.
Effectively, the move meant that prices of motor insurance products would be determined by individual insurers and takaful operators.
They would no longer be based on a set of fixed prices of motor tariffs.
BNM assistant governor Jessica Chew said insurers and takaful operators could now charge premiums that are in line with broader risk factors inherent in a group of policyholders being insured.
They could also sell new products that were not defined under the tariffs, Chew said at a briefing on the new measures here yesterday.
She said while insurers were free to create their own products that reflected their customers’ risk profile, they were required to file their products’ details with BNM before introducing them to the market. This was to enable the regulator to review the reasonability and fairness of the products’ coverage and premium.
“We will ensure that the adjustment (to liberalisation) will be reasonable and gradual.
“Obviously, excessive adjustment is also something that we are seeking to taper,” she said.
As different insurers and takaful operators had different ways of defining the risk profile group, the price of a motor policy would differ from one insurer to another, she added.
Chew said consumers, on the other hand, could now enjoy a wider choice of motor insurance products at competitive prices as liberalisation encouraged innovation and competition among insurers and takaful operators.
“Consumers should not be looking at pricing as the only factor when purchasing motor insurance protection plan. They should also look for what the policy covers, exclusions and customer service standards.”
BNM has been heading towards liberalising the motor insurance industry since last year.
The first phase of the liberalisation began on July 1 last year, where insurers and takaful operators were given the flexibility to offer new motorcycle products and add-on covers that were not defined under the existing tariff.
Prior to last year, all available products, which were defined in the motor and fire tariffs, were subject to tariff rates.
We will ensure that the adjustment (to liberalisation) will be reasonable and gradual. Obviously, excessive adjustment is also something that we are seeking to taper.
JESSICA CHEW Bank Negara Malaysia assistant governor