A FAIR market is envisaged for the general insurance sector with a risk-based pricing approach for motor insurance which will enable low-risk consumers to enjoy competitive rates compared to the high-risk drivers.
Industry players view the de-tariffication of motor insurance as a positive move.
Maybank Ageas Holding Bhd chief marketing officer Harvey Chamberlain said: “Low-risk customers will receive better pricing. Behaviour and characteristic of drivers will be taken into considerations in the pricing of policies.”
Speaking at the 5th Malaysia Insurance Summit held in Kuala Lumpur yesterday, he said factors such as accurate industry statistics and data, availability of relevant skills and expertise, consumer awareness, engagement and communication, product design and distribution as well as process and governance will play a crucial role to successfully navigate liberalisation.
The de-tariffication of motor insurance is expected to be implemented in phases starting from 2016.
Risk factors that will be factored include age, traffic violations, years of driving, licence type, occupation of owner, gender and claims history. This approach was already taken in the UK market.
Meanwhile, AIG Malaysia Insurance Bhd CEO Antony Lee said industry players are prepared for the liberalisation but need sufficient time to adapt and contemplate on the changes.
He said the industry is waiting for the guideline from Bank Negara Malaysia on how the de-tariffication will take effect.
“It is good for the general insurance market in the long term. It will be fair for the market as consumers will be paying for the risk,” he said.
“Obviously, in the starting period we will be sure to see some wild swings. It is up to the industry to educate the consumers. At the same time, consumers also need to understand and be aware of the changes,” he added.
The imposition of the detariffication may, however, lead to some unhealthy competition among insurers which may have an adverse impact on some consumers in the short term, as noted in markets like China, India, Singapore, Australia and Turkey, according to Chamberlain.
Citing an example, Chamberlain said Singapore insurance market took between five to six years to stabilise after it was liberalised in 1994 while Australia took six years.