Insurance

A discussion on how detariffication works by comparing how motor and fire insurance in Malaysia works before and after detariffication.

Currently, the premium of motor and fire insurance in Malaysia is under tariffication which means all the premium rates are standardized among all the insurance company in 2015 but the premium rates will be changed to de-tariff in year 2016 under the discussion between Bank Negara Malaysia (BNM) and all the insurance companies. BNM plan to implement detariffication in two approaches which the first step is to commence the partial detariffication in mid-year of 2016 and the second step is full detariffication works in 2020.

In 2015, the premium rates are tariff because it is restricted by Bank Negara Malaysia but after the tariffication is abolished in 2016, there will be a market competition in insurance industry as all the insurance companies are able to set their own prices and strategies based on current market position without regulated by government. In this competition, consumers will have benefits of getting lower premium on the motor and fire insurance when compared to tariff rate because the insurance companies will improve the quality of services, reduce the claim payout period for the consumers in order to fight with the other competitors and also for their company’s market share. Consumers have more choices to compare and choose the best premium rate for them. The Insurance Regulatory and Development Authority (IRDA) has plan to set a limit on the premium as insurance companies are allowed to reduce premium of motor insurance by 10%, while fire insurance premium can be cut by 20%.

Motor insurance

Before detariff ication, the premium of motor insurance in Malaysia increases gradually since 2012 and make a latest adjustment in February 2015 under the Motor Tariff rate 2015. (Appendix 1&2) According to The General Insurance Association of Malaysia (PIAM), the New Motor Cover Framework had two strategies...