Monday, March 7, 2011
Motor Insurance Adjustment Should Reward Good Drivers
Bank Negara Malaysia’s proposed adjustment of motor insurance premiums could not come at a worse time for Malaysian motorists.
The man on the street is already grappling with fuel price hikes and the attendant consequences. This additional expense will certainly add new burdens on the average household income. Low income households, in particular, will find even the smallest increase intolerable.
Past experience has shown clearly that any additional cost incurred in the provision of goods and services is always passed on to the end consumer. Therefore, we can expect to pay more not just for transportation but also consumer goods and services.
According to Bank Negara Malaysia, this adjustment is in line with the government’s liberalisation objectives of the Financial Sector Masterplan which requires the abolition of tariffs for the motor insurance business in 2016.
The insurance industry has welcomed this move claiming that the general insurance industry has been suffering due to high motor insurance claims over the last few years. However, it admits that the bulk of claims come from specific categories, namely, vehicle thefts and road accidents.
Express buses and goods vehicles are major contributors to the underwriting losses in the motor insurance class and have the highest claims ratios. Young drivers (25 years and below) have a higher claims rate compared to other age groups.
Therefore, it is unreasonable to penalise the entire nation just because a section of drivers pose greater risk to the insurers.
The government, Bank Negara Malaysia and insurers should reconsider this adjustment and devise a policy that rewards good drivers, rather than punish the entire nation.