De-Tariffication or the liberalisation of motor insurance in Malaysia, has altered car insurance in the country. It has not only affected the premium costs for a motor insurance, but also changed the criteria of buying a vehicle insurance policy altogether. This phased liberalization of motor tariff was executed in two phases, first phase being implemented in 2016 and the other in 2017.
What is De-Tariffication
Insurance tariffs are a set price ranks that are charged for an insurance product by an insurance provider. The tariff rates are decided by the Malaysian government (as set by Bank Negara Malaysia), where the insurance providers have to sell their products based on these rates. However, from July 2017, Malaysian government introduced complete de-tariffication for motor insurance policies which means that the insurance providers can now charge different rates for their insurance plans based on their own strategies and business risk models.
How Will De-Tariffication Affect a Car Insurance Policy
This liberalisation of tariff for motor insurance policies has brought in many changes to the industry.
- Effect on Premium: Post de-tariffication, your insurance premium will be decided by your insurance provider based on your risk profile. As the insurance policies will no longer have to abide by the set tariff rates, they are free to set their own rates. If you are a low-risk driver, you will be allowed to pay less premium in comparison to a high-risk driver. Once categorised as a low-risk driver, your insurance provider can offer you a lower premium as you are less likely to claim a higher insurance cover.
- Chances of Lower Rates: With no set tariff rates, insurance companies are free to promote their products to attract customers. This may result in lower premium rates offered to the consumers. You are free to browse through different insurance policies offered by various firms and choose the one with better benefits.
- New Insurance Products: Insurance companies are geared up to introduce more insurance products or schemes to attract a huge customer base.
- Improved Services: Insurance providers are becoming more professional and efficient when it comes to attending to their customers. They have improved and enhanced their services to offer easy, convenient and affordable insurance.
Deciding Risk Factors for Insurance Premium
- Age and Gender: Your age would play an important role in deciding the amount of your insurance policy. Younger applicants may have to pay a higher premium compared to the aged ones due to the risk factor. Similarly, your gender may also be important in deciding the risks associated with driving a vehicle.
- Occupation and Education: An individual with higher education or one who is at a top position in a profession can fall under low-risk profile category as determined by insurers.
- Make and Type of Your Vehicle: A vehicle’s type or model is important when deciding the risk level associated with it. Thus, luxurious vehicles may have to bear a higher premium when compared to other vehicles.
- Usage of Your Vehicle: Your purpose of using a car can will also decide your risk level. A vehicle used to go to a college or university might be more at risk compared to the one used to drive around with kids and family.
- Insurance Claim History: If you have claimed an insurance cover earlier, this may lead you to a high-risk profile category. A history of safe driving without any claims makes you a low-risk driver.
How to Benefit from De-Tariffication
- Look for the Best Deal: Before finalising on any car insurance scheme, vet the policy according to your preference to choose the one that offers the best benefits at an affordable price.Remember that a cheap insurance cover will not always be the best cover for your vehicle. Thus, study various policies carefully before purchasing.
- Attention to Details: If you have a low risk profile, you can get a better deal on your insurance premium. Safeguard your car from factors that mean higher risks. Pay attention to details such as parking space for your car and security measures (shields, covers, auto-locks and alarms), that can prevent incidents such as fire and theft.
- Get a Quote: Get an estimate of the premium you need to pay before buying a policy. Do not end up with an expensive premium unnecessarily after spending a lot on your dream vehicle.
- Drive Safe: Drive safely to avoid any accidents happening. Maintain your NCD (No Claim Discount)to minimise the premium for your motor insurance by having a low-risk profile.
De-tariffication has brought in many changes to the motor insurance industry in Malaysia. With many of them being advantageous to a common insurance policy purchaser, study your policy offerings thoroughly so that you can choose the best suitable deal for yourself. Apart from this, set a safe driving pattern to improve your risk profile. Service your vehicle regularly to maintain it in a good condition. Insure your vehicle adequately to face less problems while making a claim.