Risk-based Pricing for Motor Insurance: Good or Bad?
Did you know motor insurance in Malaysia is now detariffed or liberalised since 1st July 2017? What is detariffication and what does it mean for you as a consumer?
Motor insurance in Malaysia used to be tariffed where premiums are standardised across the industry. After detariffication, insurance providers will be able to practice risk-based pricing. Car insurance premiums will be packaged based on the risk profile of the customer.
Before DetarifficationYour car insurance premium is determined using only 2 factors: 1. The value of your vehicle (sum insured) 2. The size of the engine (cc) Everyone with the same sum insured and engine size will be paying the same amount of premium.
After DetarifficationInsurance companies will be able to determine your premium based on multiple factors, including both your vehicle and your driving profile.
1. Driving experienceDifferent age groups may be rated with different levels of risk. So, does a driver who is behind the wheel longer is always a better driver?
2. GenderOne gender may have different driving behavior or profile than the other. Really? Pretty sure that the mildest of road rage happens to anyone driving on Malaysian road.
3. Vehicle makeVehicles with high risk of theft rate will be considered higher risk. But who would have guessed that the car you own is currently the hot stuff for car theft?
4. Occupation & EducationBetter be nice to your lecturers because your CGPA will determine your motor insurance premium. A driver with higher education level may enjoy cheaper insurance premium.
5. OthersDifferent insurers may consider different factors such as claim history, where the car is usually parked, anti-theft installations and others. Like it or not, the amount of bird poop your car collects overnight under a tree will affect the insurance premium too.
Drivers with good claims history and lower risk profile may enjoy better premium rates. Have you been an exemplary driver on the road?