On July 1st, 2017, Malaysia saw the start of the 2nd phase of the Liberalisation of Motor and Fire Tariffs. This phase gives insurance companies more flexibility in setting the price for their motor insurance products. This subject has been covered extensively here and on various media outlets over the past year.
A recent article by Focus Malaysia – “Getting Ready for Insurance Detariffication” saw several industry leaders, including iBanding’s founder Luke Roho and Mark Lim, CEO of PIAM, giving their expert views on this issue.
Overview of Motor Detariffication
What has changed?
It is business as usual for most of the insurance providers. It may take some time for the companies to formulate their pricing strategy, while keeping close tabs on their competitor’s movements. A quick look at the websites of some insurance companies shows us that they have made motor detariffication a priority on their main web pages.
Takaful Malaysia Pop-Up on Detariffication
Axa provides an introduction video on Risk Base Pricing
Allianz provides a “Learn More” on Phased Liberalisation in Malaysia
What is the impacts of Motor Detariffication? Buying insurance is no longer a simple process.
Upon a closer look at the 5 insurance companies that sell motor insurance online, we noticed some interesting changes. Information that was not asked for previously is now required in order to purchase insurance online.
Etiqa for example, requires information such as policyholder’s gender, type of driving license, occupation, location and where you park your car during the night.
This additional information helps insurance companies set their insurance price based on the policyholder’s risk factors. This is called “Risk Based Pricing”. Where premium is determined by the likelihood of an accident or theft occurring.
It is all about statistics. For example, a new driver with a Probational Driving License (PDL) has a higher chance of getting into an accident than an experienced driver with a regular driver’s license. Not everyone is the same, but over a large group of people (statistic), young drivers are perceived to be riskier.
Another interesting finding is when we tried to purchase a policy online as a “young driver with several traffic violations who works a night job”, the system declined our application on the spot. We do not know the reason behind it, but for the time being, the traditional way of buying insurance through an insurance agent may be a safer solution.