With effect from 1 July, premium pricing for Motor Comprehensive; and Motor Third Party Fire and Theft products will be liberalised allowing insurers and takaful operators to determine their premium rates.
The liberalisation of motor insurance means that the price of motor insurance products will no longer be determined based on fixed tariffs. However, premium rates for Motor Third Party cover will continue to be subjected to tariff rates.
Consumers will be able to enjoy a wider choice of motor insurance products at competitive prices as liberalisation encourages innovation and competition among insurers and takaful operators, says the central bank, Bank Negara Malaysia (BNM).
Insurers and takaful operators will be able to charge premiums that are in line with broader risk factors inherent in a group of policyholders being insured; and also sell new products that are not defined by tariffs.
Effective 1 July, other than the sum insured, cubic capacity of the vehicle engine, age of vehicle and age of driver, premiums may be driven by other factors. These could be safety and security features in the vehicle, duration that the vehicle is on the road, geographical location of the vehicle (in areas with higher incidents of theft) and traffic offences on record. These factors will define the risk profile group of the policyholder which will determine the premium.
As different insurers and takaful operators have different ways of defining the risk profile group, the price of a motor policy would differ from one insurer to another.
The first phase of the Liberalisation of the Motor and Fire Tariff was introduced on 1 July 2016. During this initial phase, insurers and takaful operators were given the flexibility to offer new motor products and add-on covers that were not defined under the existing tariff.