Cheaper motor insurance coming soon? Perhaps for some, definitely not for the crash-prone
by Yamin Vong email@example.com
There’s something called “detarification” in the motor insurance industry. Detarification means that Malaysia will dismantle its current structure where the price of insurance premiums is fixed by Bank Negara.
In its place, insurance companies will be allowed to set their own prices and compete for business based on their product offerings.While detarification has been delayed because of several factors, including fears of negative consumer sentiment, it can’t be put off any longer due to Malaysia’s accession to the Trans Pacific Partnership Agreement (TPPA).
Some financial industry participants expect Bank Negara to make an announcement next month, probably after the Chinese New Year festival so as not to dampen the national holiday mood.It is expected that the detarification process will take place in three phases of two years each with the first starting in 2017.
While there is continued discussions about whether the detarification will mean higher or lower costs to motorists, there is one clear concensus: it will be a tested way of minimising motor insurance fraud.
It will allow motor insurance companies to change the behaviour of drivers, motivating drivers to avoid crashes and insurance claims. Detarification will be good for the drivers who have a clean record. These drivers will be given preferential premium rates to reflect that they are good customers that the insurance companies want.
On the other hand, there will also be insurance companies who take the other business model and seek motorist who are crash-prone and charge them a high insurance premium.
Whatever it is, insurance companies will start to compete for business and the first phase may see premiums actually cost less so that customers don’t move to another insurer.
Then as the insurers start to know their customers, they will charge higher premiums to those who have claimed or been claimed on their insurance policies.
Singapore has rolled out detarification and one of the first companies to enable usage-based insurance (UBI) is Malaysian-based CSE Connex, one of the award winners in the NST Car of the Year 2014.
MSIG Insurance announced that it will roll out a pilot project in March. UBI is a programme where the driver assents for the insurance company and its panel of vendors to install a telematic system on the driver’s vehicle. The data is shared with the insurance company and the insurance premium is based on the data provided on the vehicle’s and the driver’s usage.
According to the Asia Insurance Review, MSIG’s six-month pilot study will test the feasibility of using telematics in Singapore in partnership with automotive technology supplier, CSE Connex.
During this pilot study where MSIG will recruit drivers who are smartphone users to volunteer to have a telematics system installed in their car. This telamatics system is actually an advanced version of the vehicle security system such as the Cobra alarm system which CSE Connex is notable for.
“Through this pilot study, we hope to engage our customers more than just during renewal of policy and the claims process. We want to create more meaningful experiences with them,” said Jeremy Lian, senior vice-president of technical services, MSIG Singapore, as reported by the Asia Insurance Review.
The installation takes about an hour and can be done at home or at the office by the CSE Connex team.
Singapore recently sentenced two motor insurance fraudsters to jail. The two Malaysians would drive over from Johore to commit their “accidents” and then claim from their victims’ motor insurance policies.