By Yamin Vong
A LONG time ago, a Transport Minister drew the ire of the industry when he ruled that a kill engine device must be installed on all heavy commercial vehicles. The device would shut down the engine of the commercial vehicle when it exceeded the speed limit by a certain amount. This was a dangerous proposal because it could mean heavy commercial vehicles being immobilised along busy highways.
The biggest concern however was that the heavy commercial operators were required to buy from one company, meaning that there was no competition or choice. The obvious alternative, one that is applied in the UK but still not in Malaysia, is to install tachographs that can be downloaded by enforcement officers.
Something apparently similar is occurring, but this time, the insurance industry is taking a pro-active step for next year when the motor insurance industry enters its first year of price (premium) competition.
This time, the Malaysia Motor Insurance Pool (MMIP), i.e. the insurer of last resort, has ruled that if high-claim bus operator customers want to have coverage, then they have to install a telemetry black box which is exclusively supplied by the MMIP’s Sentul-based partner, Vehicle Telematics Online Services Sdn Bhd (VTOS), reported Shahrim Tamrim in an English daily.
But the MMIP may have to hold back until Bank Negara gives its views and announces the implementation schedule for detariffication.
This telemetry device will track the driving behaviour of each driver of the bus that has the device installed. The device will transmit data on exceptional events such as hard braking, hard cornering, collisions and draw up a risk profile of the driver/bus. If it’s a racing type of driver, with sudden braking, abrupt stops and high G cornering, this bus will draw a higher insurance premium when it’s time for renewal next year.
No doubt that the MMIP wants to have control and security of data by having its own associate company to be the telemetry supplier. This however ignores the existence of other fleet management telemetry companies with impressive track records.
Of course, the bus operators are rebelling because they will need to pay about RM3,200 per vehicle, of which RM2,200 is a one-off device cost and RM900 is the annual fee for the telco charges and data processing/security centre costs.
There is also the question of whether this appointment of one contractor runs foul of the Malaysian Competition Commission’s laws to promote free trade. With about 48,000 buses (including 16,356 school buses) on the road, the telematic-or-no-insurance policy by the MMIP is a sign of the times because many insurance companies do not want to insure these buses. The risk is high compared with the premium income that is allowed by Bank Negara, so most of these buses are instead insured by the insurer of last resort: the MMIP.
We’ve written in these pages about de-tariffication in the motor insurance industry. Detariffication means that motor insurance companies will be allowed to compete for business over a three-year period starting from 2017 with insurance premium rates being liberalised by plus/minus 20 per cent of the premium fixed by Bank Negara. By 2020, motor insurance companies will be free to set their own premiums.
What the General Motor Insurance Association should have done is to educate users of the MMIP about the upcoming detariffication programme.
There are costs and benefits under the detariffication programme. Bus operators with a low risk profile will benefit from more competitive insurance premiums. Individual insurance companies may even compete for their business. Bus operators with crash-prone drivers and high insurance claims will suffer high premium costs.
But how to know which driver and bus operator has a good profile or not?
This is where insurance companies have to work with bus operators.
It’s good that the MMIP has started its education programme, but it’s a bit tough to give bus operators less than a month’s notice.
Perhaps three months is better and most important of all is that the MMIP allows the bus operator to choose which company from a panel of MMIP-approved suppliers to provide and install the telemetry device, assuming that the telemetry system is able to “talk” with the control centre of the MMIP.
MMIP as a high risk insurance pool organisation stated that it introduced the safety measure to safeguard the millions of passengers, “by introducing insurance telematics to identify and monitor every driver in control of its insured vehicles on a 24/7 basis. In the first stage, bus operators which have a consistently higher crash claim than the premium it pays will need to take up insurance telematics. This initiative is opened to all bus operators,” said the notice.
As for SPAD’s statement that its GPS system on buses was good enough, that’s not really correct because its system is a navigational system while the telematics system for insurance is more about driving mode than where the driver is.