The global price increase of fuel in 2008 triggered abnormal price hikes for major consumer products. The general insurance industry was not spared the effect of increasing prices during this dramatic period which led to the industry responding quickly and adopting more prudent underwriting measures.
This reaction by insurers was especially appropriate in relation to addressing the impact on the motor insurance portfolio. Motor insurance comprised 44.3 percent of the overall general insurance business in Malaysia and in 2007, general insurers paid out RM3.49 billion or an average RM9.6 million a day for motor claims, out of the total gross premiums of RM4.68 billion collected that year. The combined claims ratio amounted to 114 percent in 2007 and it deteriorated to 121 percent in the first half of 2008. Malaysian general insurance companies had been suffering from high claims ratio which exceeded 100 percent in the last five years. These results were largely due to increase in the frequency of vehicle thefts and road accidents as well as increasing severity of claims cost per accident, especially for third-party bodily injury claims.
Express buses and goods vehicles were found to be major contributors to the underwriting losses in the motor insurance class and have the highest claims ratio. In 2007, the combined claims ratio for express buses was 335 percent, followed by goods vehicles at 155 percent. The rising motor claims made by young drivers was also another major concern. Industry statistics showed that the claims ratio attributed to drivers of 25 years of age and below was about 40 percent higher than other insured age groups. The rising motor claims ratio had resulted in insurers adopting more stringent underwriting measures for motor insurance, including the application of premium loadings.