The General Insurance industry is slowly changing (although we may not have noticed those changes) in the face of the liberalisation roadmap for motor and fire insurance practices; a “Roadmap” dedicated by regulators towards building a more modern and robust market while operating within a more disciplined framework.
It is liken shifting from an old tariff regime where insurers operate within some well defined rules and regulations, to a more “file-and-use”, “file-before-use” or “file-for-approval” sort of practices. The word, “file” is for insurers filing their product requirements, firstly to their Association (IPREB specifically for wordings approval) if the said product falls within the Roadmap’s para 2.2 (Motor) or 2.3 (Fire) definition and secondly, if the product falls within the Roadmap para 11.5 for Motor and 11.6 for Fire, then submission to Bank Negara (BNM) for filing or approval is necessary.
According to industry sources there were quite a number of submissions for product approval since 1st July 2016, particularly to IPREB for wordings approval; existing products that fall within para 2.2 or 2.3 were the most reported todate. Some submissions to the Bank were noted, which are mostly to right the wrongs of yesteryears’ practices, mainly products that breached the tariff (beyond the radar) or contravening para 11.5 or 11.6.
Righting the wrongs? Yes, the Roadmap prescribed rulings that insurers must right those wrongs on or before 31 Oct 2016, and have those existing “wrongs” rectified and approved by the IPREB. For those that breaches 11.5 or 11.6, “gung-ho” insurers should stop selling until both IPREB and the relevant regulators had approved their scheme of things…. Then we still see some insurers continuing to sell products with a small part of the policy coverage contravening the “Roadmap”, example, providing first loss flood cover albeitly small the coverage but camouflaged as “compassionate flood losses” (tied to flood damages to the vehicle)…. providing flood related losses with almost nil premium contravening the motor tariff specifically iro E57 Special Perils extension.
“The latest that we have heard were some 120++ cases of existing products being submitted to the IPREB but surprisingly only some 10++ cases iro new product were submitted for approval.”
Paying that extras? (True or Not?) According to some agents, insurers do pay those extras…. (BTW we have not seen any such payment, just reporting on what’s happening at ground level on the way to liberalisation).
Maybe merely hearsay….but if that is indeed true, how do those guys actually pay? Those guys can’t be doing this, which is sort of an act of catching fleas on the tiger’s head ?
(….mind boggling, I supposed….) ?
Some agents complain that those agents having that extras tend to sell on discounting basis or engaging non qualified sub-agents to expand their market reach with those extras.
Perhaps the Roadmap should include liberalising limits set on commission and allowing agents the option to contract whether on a “2 or more principals” basis or on an independent agency basis with no limitations to the number of principal.
“I bet liberating both commission payout and number of principal representation helps eradicate those unwanted under-the-table payouts, especially where such payouts are needed to be file-before-use at the regulator.”
How about premium that policyholders need to pay come 1st July 2017? The premium that most policyholders need to pay for their motor insurance renewal is going to be higher, ranging from a slight increase to some 70% jump in premium rates compared to the expiring rates, this is especially so if anyone is already identified as a bad driver.
(If there is anything to predict from, this would be from the ISM market modelled pricing…. ) 70% of the existing policyholders should be expecting an increase…., which I think is long overdue for an industry that had not been able to review pricing rates over the last 30 years, and has always been branded as a market with the lowest premium rates for motor insurance coverage; at least within the ASEAN.
“But then the percentage of increase would very much depend on the number of insurers and Takaful operators filing for regulators’ approval and whether the regulators are kind enough to approve such increase.”
Policyholders who fall under the “discounted” segment should be thankful….thankful simply because you have just purchased a new vehicle that falls within the big three car brands. Newly registered cars tend to have a better discount, I don’t think I need to elaborate any further. On the other hand if you had purchased a car that depreciates much more faster than the major brands and makes, then you may end up paying a higher rate on renewal.
Some owners of higher cubic capacity cars may just be able to escape with slight decrease in premium rate on renewal. Chances for those owners of higher performance vehicles, like Porsche, Lamborghini…. may not be so fortunate…. consider that you may have to pay abit higher premium rate than before to help subsidise the poorer segments. ….consider that add being victimised, whatever!
“High Performance Cars owners may just need to do some national services to help out, by smothering the rates of increase for those ‘poorer’ segments…. “
Determinants of Premium rates
There are many such determinants (or risk factors) but insurers would realistically settle for those that that are practical to obtain and easily have info validated at the PoS system.
Sum Insured. This has a high correlation with cubic capacity (CC)…. Generally higher CC almost always means higher sum insured. In recent years this may not be something near the truth, especially where turbo-charged vehicles are beginning a norm. Perhaps some insurers will factor in some increases to deal with vehicles having low CC but are turbo-charged.
“Sum Insured seems to be a major determinant of the car premium rate. If the sum insured on renewal drops significantly, ie., because of the car’s market value then you are likely to get a proportionately higher rate…. than another car-make with a more sustainable market demand.”
Location of vehicle. Your residence and location of where your car is usually kept or used should be another important determinant ….if policyholder and car were both located over at the southern states then he/she should see a higher (ie., increase) premium relative to those at the central and northern states.
Why? The current loss ratios posed by the southerners are bothersome…. This is common knowledge within the industry, so policyholders who are located within the Southern states must be prepared to pay a higher rate…. ?
“….if southerners don’t want to pay higher, try telematics or some other driver-behaviour-improving gadgets. But this is not effected to be sooner, not on 1st July…. “
Age of policyholders and those named drivers. We all know too well younger drivers below 25 years are the main culprits driving up loss frequency and severity. So…. expect an increase ? but don’t worry if you drive and continue to drive well then your NCD should help you save on premium, so please prove yourself!
Then, male policyholders with age hitting the same range between 50s and 60s may see some likelihood of premium rates hike. Why? Explanation is usually tied to their vehicles being used by their growing teenage children…. Again this has something to do with kids or young drivers.
Come 70s, whether male or female do expect some increase for simple reason our pricing actuary thinks you are probably senile and maybe slowly developing Alzheimer or dystrophy symptoms.
Gender…. Male or Female. They say, female should entitle for a lower premium but this is not all true. Housewives between the age of mid-30s and late 40s have tendency towards higher loss frequency but minor though…. I think this has something to do with sending off and fetching their school-going children, which makes rush-job out of the housewives…. frustrating housewives, perhaps?
“Corporations are likely to have slight premium rate decreases…. Simple explanation is, they generally have newer vehicles and relatively higher premium per policy or a higher average premium. Although this segment generally has higher loss frequency and severity but are sustainable because of the relatively higher average premium.”
Occupation. Policyholder’s occupation is important, i.e., if your car ? is constantly used in the course of your work then high chance you would have to pay a higher premium rate than before. If it is always parked within office building parking bay then this is good news.
Declaration of driver’s details is important. Insurers would want to emphasise on risk-related information on drivers other than the policyholder. If these details are not willingly disclose then rate increase may be imminent, of course in addition to the regular RM400 compulsory excess upon vehicle damage claim.
Hope I have written enough for this time….