Come 2017, motor insurance rates will be based on a list of risk factors, instead of the current pricing policy.
This was revealed in an article by paultan.org – a Malaysian automotive blog – a move that now means drivers will have to pay insurance premium rates based on how much risk they are perceived to carry.
Among the risk factors that would be considered include location of residence, vehicle make and model, use of vehicle, occupation of owner, history of claims, gender and age.
“For instance, owners and models with high repair costs, owners of high performance vehicles, owners with a fewer years of driving experiences or those who live in crime-prone areas may have to pay higher premiums,” writes site contributor Hafriz Shah.
The rates offered however will not be regulated and may vary across different insurance providers.
The change in how one’s car is to be insured – confirmed by Bank Negara in its Financial Stability and Payment Systems Report 2015, released yesterday – is part of the liberalisation of motor insurance tariffs in Malaysia.
The move to liberalise the motor insurance market is expected to provide greater pricing flexibility between insurance providers, which will promote competition between them.
“Consumers will largely benefit from this open market, with insurers competing to offer better coverage, services and of course, pricing. More streamlined practices will also minimise delays in claims settlements,” the article read.
While the liberalisation of tariffs will begin July 1 of this year, it will be carried out in stages “to minimise the move’s impact to both consumers and insurers”.
The first phase will enable the industry to offer “new products” and optional add-on covers at market rates. These include additional policies to cover engine hydro-locks, lost car key replacement, and so on.
Prices of these new products will not be regulated and will be determined by the market where insurance providers will be allowed to fix prices as they see fit to attract consumers.
The second phase is where risk-based assessments will be introduced and rates determined by the market apart from the dis-application of tariff rates for comprehensive and third party motor insurance.
“Enhancements to consumer protection will also be introduced to ensure proper governance over product design and pricing. Insurers are expected to assess the risks appropriately and consistently for fair treatment of consumers,” the article read.
The standard scope of coverage disclosure will also be increased, making it easier for consumers to compare insurers.
Consumers , according to the report, will also be open to customise coverage limits or purchase optional extensions as they please.