Rewarding Good Driver - Lower Premium

The government is currently in talks with the insurance industry to reward good drivers in ways such as lower insurance premiums. This carrot part in the carrot and stick approach to changing driver behaviour was revealed by transport minister Anthony Loke yesterday.

“Safer cars and roads are important, but equally important are safer drivers. That’s why at the ministry of transport, we’re advocating a series of campaigns to advocate, to propagate, to promote the culture of road safety and driving safety,” he said at the launch of Drive for Life, a campaign by Bosch Automotive Aftermarket Malaysia advocating for safer cars and roads.

“That’s why I’m a big believer of applying carrot and stick approaches. For bad drivers, we must penalise them. Of course this makes me very unpopular among some drivers – people are criticising us for applying some of the hard measures in terms of enforcement – but I think this is national interest, and we must be prepared to take hard decisions. The enforcement must be strict and strong, but at the same time, just the stick is not enough.

“There must be a carrot, and that’s why we’re advocating rewarding the good drivers. There must be some schemes, initiatives, to reward good drivers. Because as with human nature, if you have some rewards, people tend to change their behaviour. These are initiatives that we hope we can roll out in the coming months,” Loke said.

The minister described the rewards scheme as a win-win for both motorists and the insurance industry. “I have been in talks with various stakeholders including some insurance companies to come up with a scheme of how to reward good drivers. For instance, if they do not have any traffic summonses, what kind of reward they (insurance companies) can give, whether it’s in the form of reduction in insurance premiums.

“That’s actually a win-win situation, and it goes hand-in-hand with the insurance industry. If we can produce a generation of good drivers, if drivers are better behaved on the road, then the companies will be the ones who benefit, because they will not have to pay so much insurance payouts. In the end, it will be beneficial to their industry as well,” he added.

There’s nothing in it, financially, for the government in such a scheme. “For the government, we’re not looking from the dollars and cents perspective, but more to reduce road accidents and to create a safer environment for all drivers in Malaysia,” Loke said, adding that data and a driver’s track record can be obtained from JPJ and PDRM.

In the press conference after the launch, Loke said that the government are in the final stages of talks with the General Insurance Association of Malaysia (PIAM) and auto insurance players, with the rewards portion yet to be determined.

The motor insurance industry is currently undergoing a liberalization phase, with full market liberalization schedule for 2019. Compared to the fixed tariffs of old, insurance companies are now free to price their offerings, and how much one pays for insurance will soon be determined by his or her risk profile. This risk-based assessment is already present in many countries, and it rewards those who are perceived to be low risk with lower premiums. A clean sheet with the JPJ and PDRM does indicate lower risk.