PIAM explains how motor insurance pricing works

KUALA LUMPUR: The General Insurance Association of Malaysia (PIAM), the trade association for licensed direct and reinsurance companies for general insurance, has pointed out that it is not involved in the pricing decisions of its members.

It said that during the phased liberalisation starting July 1, 2016 to promote product innovation and competition, insurers were allowed to introduce new motor products to better serve consumers’ needs and priced them accordingly subject to a limit of plus/minus 10 per cent from the original tariff rates as at June 30, 2016.

The limitation were meant to soften the impact of any sudden and significant changes in premium on consumers.

Any increase above that limit would need Bank Negara approval, it said.

"PIAM hopes this clarifies to the motoring public and other stakeholders that while the process initiated for the gradual removal of requirements under the motor tariff has begun, pricing continues to be regulated by the industry regulator.

"The industry anticipates further liberalisation and looks forward to working with Bank Negara on the eventual opening up of the motor market," it said in a statement today.

On the Covid-19 impact on the motor insurance industry, it said the motor business weakened due to poor consumer demand.

According to the Malaysian Automotive Association, the total industry volume (sales of new passenger and commercial vehicles) registered in 2020 was 529,434 units, a decrease of 12.4 per cent compared with 2019.

Gross direct premium for motor insurance fell by 0.21 per cent in 2020 compared with 2019.

PIAM believed that full liberalisation would lead to fairer pricing that would benefit safe drivers and lead to improved products, technologically-driven consumer solutions, and a better overall consumer experience.