Good Behavior Lower Rate

The implementation of insurance discounts for drivers with spotless records will at first hurt general insurance companies in the short term, but lower claims will help to benefit the industry over the longer term.

The General Insurance Association of Malaysia (PIAM) chairman Antony Lee - that the implementation of the system for motor insurance would initially reduce insurers’ gross earned premiums in the short term.

“However, once the desired outcome of encouraging good and responsible driving behaviour is achieved, there will be an overall reduction in motor claims which will benefit the insurance companies.

“This will create a win-win situation for both the motorist and the insurance industry,” he said.

He added that the motor insurance claims incurred by the industry was hefty, as between January and June this year, the total motor insurance claims incurred by the industry amounted to RM2.71bil.

Lee said this translates to motor insurers paying out a staggering RM14.8mil per day in property damage, bodily injury and vehicle theft.

He was reacting to the plan by the Transport Ministry where drivers with no demerit points on their licence will enjoy discounts on insurance premiums, a scheme that could be implemented next year.

Transport Minister Anthony Loke Siew Fook at a recent press briefing after his visit to the Automated Awareness Safety System (Awas) noted that the ministry would initiate discussions with PIAM on the matter.

Commenting on the move, Lee said PIAM had met the minister and senior officials from the Transport Ministry in July this year to discuss a collaboration on road safety initiatives.

“There are definitely further dialogues in the pipeline.

“We are strongly encouraged by the minister’s keen interest in reducing road accidents,” he added.

Meanwhile, it is learnt that insurers are closely studying the details of the demerit system and are in support of the system, as it would reduce motor claims drastically.

They have yet to work out, among others, the quantum of the discount on the motor insurance.

The move is viewed by insurance analysts as in line with the phased liberalisation of the motor insurance tariff which started in 2016.

Since then, the general insurance market in Malaysia is being opened up to allow a more equitable approach to the charging of motor insurance premiums.

For the past three decades, the premiums which insurance companies could charge consumers were regulated by a tariff structure, ie, a set of fixed price list created under insurance acts to streamline and control premium charges.

Lee said that the demerit point system was good, as it is based on the principle that a good risk should be rewarded and incentivised while a bad risk should be recognised.

“This means that a good driver should pay lesser premium compared to another driver who is more likely to be involved in road accidents,” he said.

Awas, which integrates the Automated Enforcement System (AES) with the demerit point system (Kejara), is a good start for the implementation of this policy, he noted.

As Malaysia still has one of the highest accident and fatality rates in the region, Lee said giving safe drivers a discount on their motor insurance premium would certainly help to encourage good driving behaviour on the road, thereby reducing the high accident and road fatality rate in the country.