BNM introduces flexible pricing for motor insurance

BNM introduces flexible pricing for motor insurance
Drivers will be incentivised to inculcate safe driving habits which will benefit them and the public. Photo for illustration purpose
KUALA LUMPUR: Bank Negara Malaysia (BNM) will further liberalise the motor insurance tariff by introducing a flexible pricing for motor comprehensive and motor third-party fire and theft insurance products effective July 1, 2017.

The premium for motor third party product, however, would continue to be subjected to tariff rates.

Assistant Governor, Jessica Chew, said the move would follow the first phase of motor and fire tariff liberalisation introduced on July 1 last year, which saw insurers and takaful operators given the flexibility to offer new motor products and add-on covers that were not defined under the existing tariff of that time.

"From July 1 onwards, the premium rates for motor comprehensive and motor third-party fire and theft products will be liberalised where premium pricing will be determined by individual insurers and takaful operators," she told reporters here today.

She said under the new pricing method, safety and security features of vehicle, duration of vehicle on the road, geographical location of vehicle and traffic offences on record would also determine the insurance premium apart from sum insured, cubic capacity and age of vehicle.

"This is in contrast to the current calculation for premium which is fixed based on the sum insured and model of the vehicle plus limited premium loading based on the age of the driver and number of accident record minus no claim discount (NCD) of up to 55 per cent," she said.
Chew said the aim of the liberalisation was to gradually move the tariff towards pricing that was more equitable to take into account a broader risk factors and reduce cross-subsidisation across business classes and risk groups.

"The reality is that the premium that has been collected and the claims that had been made particularly involving third-party bodily injury has a big disparity. On average, of every RM1 collected, basically the claims that are made involving third-party bodily injury is RM1.30 to RM3," she said.

She said the new pricing method also aimed at incentivising good risk management and safe driving behaviour among consumers which could benefit from lower premiums in line with improving risk profiles.

"The drivers will be incentivised to inculcate safe driving habits which will benefit them and the public," she said.

She said the pricing method would also open up rooms for innovation as insurers and takaful providers would have a greater flexibility in their product offerings.

"For consumers, the benefits include an improvement in the quality of service and a wider range of products at competitive prices due to greater competition among insurers," she said.

She said the availability of new products with different features would also enable consumers and businesses to obtain the coverage that best meets their needs.

Apart from that, she said, the competitive pricing would be offered by insurers and takaful operators where consumers might benefit from shopping around to obtain the best deals that suit their needs.

She said despite the flexible pricing, BNM would continue to monitor the industry to ensure adjustment made to the prices were reasonable.

"Excessive adjustment is something that we want to taper," she said.

She said the NCD structure would also remain unchanged and continue to be transferable from one insurer or takaful operator to another.

Chew said after the effective date, consumers could continue to purchase additional products to enhance the insurance protection for motor vehicles.

However, she advised consumers do some survey as they could also purchase product offerings which already included their additional needs.

"Do make informed decision by shopping around for different quotations by contacting the agents, insurers or takaful operators through their call centres or online channels before you make your purchase," she said. --Bernama