Car Insurance Detariffing and What It Means for You
Have you heard about the upcoming Motor Insurance Detariffication exercise yet? Here’s your scoop on this trending development in the motor insurance segment and what it will mean for you the next time you get your car insurance policy renewed.
Get ready for the ‘Phased Liberalisation of Motor Tariffs’ also known as Motor Insurance Detariffication. It’ll affect ALL car-owning persons (that’s you or at the very least, someone you know), so read on!
What is Motor Insurance Detariffication All About?
Before we get into that, you might be wondering what a ‘tariff’ is in the first place. FYI, it is a fixed price, regulated or controlled by the government. In the realm of motor insurance, Bank Negara Malaysia has controlled premium pricing by insurance companies and takaful operators.
Premiums were being estimated on the car model, engine capacity and age as well as other factors, but not the driver’s risk profile. In effect, the premiums that policyholders were paying did not necessarily reflect the likelihood of an accident or a car being stolen.
With such streamlined premiums, those who were experienced, conscientious drivers were likely to pay same the amount as those who were habitually reckless or inexperienced.
But now that premium prices for motor insurance is about to be detariffed, insurance providers will be allowed to charge based on the individual driver’s risk profile, amongst others.
So Is This A Good Thing Or A Bad Thing?
For now, it appears to be a positive and welcome change. People now have a monetary incentive (potentially cheaper premiums) to drive conscientiously. However, it could also mean higher premiums or reduced coverage for people with multiple accident records and a history of traffic summons.
What Else Can the Detariffication Exercise Mean For Drivers?
As the ‘liberalisation’ comes into effect, let’s take a closer look at what everyday car owners can expect:
Better Competition Among ProvidersNow that insurance providers and takaful operators are free to develop their own pricing structures based on the free market and risk-level of drivers, they’ll be competing (more than before) for your business. Such healthy competition typically equals better product choices, efficient pricing and improved quality of service.A Change In Your PremiumsYour premiums will begin to reflect a broader range of factors such as your driving attitude, handling and safety systems installed in your vehicle as well as competition among providers. Thus, it’s bound to change. However, you don’t have to worry about prices bloating too much because heavy increases will still be monitored by Bank Negara Malaysia. Moreover, while it’s unlikely that premiums are significantly reduced, you might receive a wider range of benefits in exchange.New and Innovative Insurance ProductsDuring the first phase of detariffication which commenced on the 1st of July 2016, insurers were allowed to introduce non-tariff products and optional add-on covers. But you can now expect new products and packages to enter the market to better suit the needs of different drivers. For instance, you might find special student packages, new drivers and long-distance plans, etc. available.
Update 02/06/2017: Check out our Top 5 Predictions of Motor Detariff for better insights and possibilities of what's to come.
When Will Motor Detariffication Come into Effect?
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The liberalisation is being conducted in phases, where the first, as mentioned above, came into effect last year. The next phase will be commencing in July 2017 where tariffed rates will be removed for ‘Motor Comprehensive and Motor Third Party Fire and Theft’ policies.
For Motor Third Party policies, only gradual adjustments will be made to the tariff but for now, it is still subject to prevailing rates.
Also, a review in 2019 will be conducted to assess the detariffication in terms of consumer and industry readiness.
What You Can Do To Secure Better Premiums for a Car Insurance Policy under Detariffication
Apart from driving more conscientiously, maintaining your vehicle and making sure it is equipped with safety and security equipment (e.g. anti-theft and collision mitigation tech), you should also shop around!
Compare policies online and choose one that best suits your needs in terms of price, coverage as well as convenient extras such as a wide network of workshops and free emergency towing services.
On a separate but related note, is it time to renew your car insurance policy yet? Check out our new tool to compare and get the best deals for your comprehensive car insurance.
Now you’re all caught up with the story of the upcoming motor detariffication! Drive safe!