ISM – ABI, a market-valuation connectivity in the waiting?

ISM - ABI

INTEGRATION FOR ALL THE WRONG REASONS?

 

After Kurnia and ISM announced the ISM – ABI system’s MARKET VALUATION tie-up, which involve integrating Kurnia’s front-end point-of-sales system with ISM – ABI system, my phone(s) were flooded with calls enquiring and query as to why we were slow or rather inactive in this form of integration. The perception was that it is of great benefits to the agents!

Is integration with ISM-ABI system at the front-end a really good stuff with Return of Investment (ROI) achievable?

Without arguing our hearts out, it is best to tag those pros and cons as depicted in those ISM’s circulars and presentations over the last couple of years:

THE PROS

  1. Agents and the customer services personnel would be able to ascertain the market value of the Insured’s vehicle
THE CONS

  1. If all the point-of-sales system are integrated enabling all the relevant parties (including agents) access to the system to check the market value in the ABI, the company must be prepared to pay for the costs – RM0.50 per enquiry (report). With 2,000 agents making 5-case enquiries in a day would translate into a whooping RM5,000 a day! A whooper RM1,235,000 in a year???? It looks bad if the company merely integrate for the customer service usage only!
  2. After checking, the users can decide whether to adopt market value from ISM-ABI, if yes then Endorsement 113 of the Motor tariff would be applied, otherwise, it is back to the original tariff wordings. With these two options, the company would have to spend at least RM25,000 to tweak the front-end system as well as the integration uploading to the back-end system! Not much though, but much of company’s resources are utilised for setting, designing and testing.
  3. The ISM – ABI database on market values is limited to a certain range of models. And, it is not too relevant for areas outside Klang Valley. The system in such circumstances leaves assumption (arbitrary) of market value to the handling staff or the agent to decide with their customer. You can’t be kidding when you allowed the agents to set some agreed value for COMMERCIAL VEHICLES and MOTORCYCLES!
  4. Intermediaries (mostly from the used car traders) and the customers may not agree with the market value derived from the ABI – main reasons are always related to financing amount – you cannot insured at a Sum Insured amount below those of the finance amount! Business coming from agency sources may ends up outside the ABI market value – we can easily estimate this at 80% and above. So, what is the point for integration? The ROI does not measure up…
  5. Endorsement 113 can be very illusive – it is agreed market value when there is a theft loss or a total loss position, however, this does not apply where partial loss is concerned. In a PARTIAL LOSS situation, the 113 wordings are such, the MARKET VALUE AT THE TIME OF LOSS would be checked at ABI level to determine if the Sum Insured (ABI value at commencement of cover) is lower than the ABI value at the time of loss by > 10% margin. If this difference is by > 10% of the earlier ABI value, then the AVERAGE CLAUSE shall apply! What we are trying to emphasize here, “ENDORSEMENT 113 IS FLAWED” – making it difficult to explain to the Insured when average is applied.

Having tagged the PROS and CONS of the system, it looks very clear as to why most insurers do not rush into integrating their front-end point-of-system with ISM – ABI. “The endorsement 113 has two faces – agreed value for total loss but average clause applicable if otherwise – isn’t this confusing for the customers?”

Probably it makes more sense if we can make it consistent on the basis of everything being on agreed value – agreed to the ABI valuation at commencement of cover. It is time for the industry to consider two options to setting the Sum Insured (of Private Motor vehicles and Motorcycles only) – one being based on an agreed ABI value and the other on the usual market value as provided by the Insured where average clause applies. This makes explanation easier and understandable, at least from the Insured’s perspectives.

On the contrary, we should not wish this for the COMMERCIAL vehicle segments – even with the current endorsement 113, this sounds abit bad for the insurers, having agreed value tagged to total loss events!

On the other hand it would be most unfair if we did not tag what was being argued by ISM over the past few years…

THE ISM-ABI’s PERSPECTIVES
All insurers stand to gain by using the system which is tightly integrated with the ISM-NCD System as part of improving motor underwriting controls. The real value are:

  1. Controlling the sum insured of vehicles for comprehensive policies
  2. Accurately identifying and recording the vehicle being insured

These controls will be critical when the new motor insurance system is implemented. The system can also be used to determine the market value at the time of claim.

What was meant by “Controlling the sum insured…..”? and “Accurately identifying and recording the vehicle being insured”? Are they trying to tell the insurers that they are not able to control the setting of sum insured and administration of market value in the claims settlement process? The answers in every underwriter’s mind have always been clear – insurers are more capable of handling their own controls better than to opt for some outsourced system with a much different way of executing things and most likely duplicating what is already in place. Does this justify any of the ROI? The current method of setting the sum insured somehow allows the Insured to set it SOMEWHERE NEAR the market value, ie. there is a 10% margin to play with before average clause is called into effect

What was said by the ISM may sounds true on paper but in practice this can be extremely difficult – the finance institution may not agree with the ABI value that is lower than their’s at time of financing, the customer may not see the logic if the ABI value is higher than the finance’s valuation of the vehicle. On the other hand, the existing method also provides customers and agents to craft the SUM INSURED within the 10% MARGIN which enables some PREMIUM SAVINGS where necessary! The intermediaries and insurance practitioners at the front lines have acquired such crafting ability – “WHY TAKE IT AWAY?”

But admist this argument, this does not mean things are looking bad for Kurnia! They may have other strategies behind this show…..We wish them well.


Hope to get some exchanges of view – Do comment in the comment form below. THANK YOU FOR YOUR NO-HOLD BARRED EXCHANGES – THE INDUSTRY NEEDS THEM TO THRIVE….. :mrgreen:

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17 comments for “ISM – ABI, a market-valuation connectivity in the waiting?

  1. Matt
    September 24, 2013 at 08:28

    Yes, the ISM ABI has provided the options but there are just too many market value errors or were these inconsistencies?

  2. ALICE BEH
    March 2, 2012 at 10:13

    TOYOTA UNSER 1.8GLI(a)

    • March 3, 2012 at 09:57

      Anything with this car? do you want a quote? you gonna give me more details!

  3. yoga
    September 7, 2011 at 16:22

    “BNM said the advice to consumers on the market value must be based on the ISM or ANY OTHER CREDIBLE VEHICLE VALUATION DATABASE”
    what is the meaning of other “CREDIBLE”. any example?

    • September 10, 2011 at 23:39

      “Credible” in simplest of terms the service provider must be able to provide database of vehicle valuation that can be justified….. Usually the test is based on the acceptability of the insurers. Nonetheless, the industry is working out parameters to define acceptability and suitability of the service provider. Anyway as of now only ISM – ABI is the only service provider having been approved by both the industry and Central Bank.

  4. muhammad
    August 2, 2011 at 11:56

    i want to know the market price for proton perdana v6 year 2004

    • August 2, 2011 at 22:12

      I do not have any link to the ISM ABI system so you would have to check with those companies that have already installed the linkup with ISM, i.e. Kurnia Insurance.

      • yoga
        September 7, 2011 at 16:24

        you can also can check easily by click to redbookasiapacific.com and search for the value by some simple steps.

  5. Anad
    July 30, 2011 at 22:20

    Now bank negara is insisting this to be made available to all policyholders, so what is next

  6. July 24, 2011 at 04:33

    This is very interesting, You are an overly professional blogger. I’ve joined your rss feed and stay up for looking for more of your wonderful post. Also, I have shared your web site in my social networks

  7. April 9, 2010 at 14:40

    Waugh. Great blog. Found it by accident when I search for car market value. But belive me, I´ll come back to this great blog

  8. simon
    March 25, 2010 at 00:15

    someone told me Kurnia’s agents are not happy with the ABI’s valuation, the market value range is too wide, so what’s the point?

    • March 25, 2010 at 23:00

      I can’t answer, you would have to ask the relevant source….

  9. Ng Eng Yew
    March 15, 2010 at 22:30

    The proper endorsement that should be use is endt 87.
    The market is just not ready for this yet – you can see insurers arranging agreement with franchise dealers now – “new for old” for first year vehicle – all these are outside the tariff.
    Applying agree value when there is a partial loss should not be subjected to tariff. However, if there is an improvement after repairs, think it is fair to apply betterment esp if vehicle above 5 years old

    • March 17, 2010 at 00:18

      Endorsement 87, that’s what the franchise dealers are requesting the insurers to insert into the policy for new cars, usually up to 2 years old. But most do not insist on new for old, more like insisting on some agreed value. Yeah! this is making the tariff blur. But in this topic the endorsement 113 is really about making ISM – ABI the authoritative system for market value of vehicle. ISM – ABI market value will be the determinant of the final market value in event of a claim for those vehicles that were insured on ISM ABI’s valuation. These two endorsements are different in kind….

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