Liberalisation Of Motor Insurance Tariffs

The liberalisation of motor insurance tariffs has been implemented since July 2017.

Learn more about this liberalisation and how it affects you as a consumer.

Car Insurance

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Effective 1 July 2017, Bank Negara Malaysia (BNM) has implemented the liberalisation of motor insurance tariffs for Motor Comprehensive and Motor Third Party, Fire and Theft products. As a result of the liberalisation, the premium rates for the products were determined by individual insurers and takaful operators. This move has since enabled consumers to enjoy more options as the premium rates vary across insurers.

In this article, we share more about the motor insurance tariff liberalisation and how it affects you as a consumer.

Bank Negara Malaysia implemented the liberalisation of motor insurance tariffs effective 1 July 2017

What does the liberalisation of motor insurance tariffs mean?

The liberalisation of motor insurance tariffs means that motor insurance premiums in the market are no longer based on the motor tariffs previously set by Bank Negara Malaysia. The liberalisation has enabled insurers and takaful operators to determine the premium rates for Motor Comprehensive and Motor Third Party, Fire and Theft products accordingly.

This move benefits both insurers and takaful operators as well as consumers. For insurers and takaful operators, they can charge premiums or contributions that are suitable to policyholders. They can also customise insurance or takaful plans based on the risk profile of their policyholders. Meanwhile, consumers can enjoy a wider choice of motor insurance products at competitive prices in the market.

What is a motor insurance tariff?

Tariffs are a set of fixed prices under the insurance acts to streamline and control the premium charges and policy wordings. For instance, based on the tariffs, insurers and takaful operators do not have the right to change the premium rates.

As the supervisory authority for all financial institutions, Bank Negara Malaysia set and oversaw the motor insurance tariffs.

How is the motor insurance calculation before the motor tariff liberalisation?

Before the liberalisation, the calculation of motor insurance premiums was based on the sum insured and vehicle model. Insurers were also allowed to apply a limited premium loading based on the driver’s age and number of road accidents.

Besides, the calculated premium was adjusted against the No Claim Discount (NCD) depending on the driver’s claims record. Generally, drivers with good driving records can enjoy a higher percentage of NCD up to 55% for private cars.

However, drivers might receive different quotes from different insurers due to other factors mentioned above.

How is the motor insurance calculation after the motor tariff liberalisation?

Starting from 1 July 2017, more risk factors are taken into account in determining motor insurance premiums. The risks are mainly based on the sum insured, vehicle engine capacity and the age of the driver and vehicle.

However, additional factors as follows may also affect the premiums:

  • The safety features of the vehicle
  • The duration that the vehicle is on the road
  • The location of the vehicle (e.g. in areas with higher incidents of theft)
  • Traffic offences on record

The above factors, among others, will define the risk profile of policyholders which will then determine the premiums. The premiums may vary across insurers as insurers and takaful operators may have different ways of defining the risk profile of their policyholders.

When was the implementation of the motor tariff liberalisation?

For the record, the first phase of the motor tariff liberalisation was introduced on 1 July 2016. During this phase, insurers and takaful operators had the flexibility to offer new motor products and additional coverages not defined under the existing tariff.

Beginning 1 July 2017, more additional flexibility has been provided to insurers and takaful operators. They are free to determine the premium rates for Motor Comprehensive and Motor Third Party, Fire and Theft products.

However, the premium rates for Motor Third Party products continue to be subject to the tariffs.

The benefits of the motor tariff liberalisation to motor vehicle owners

As stated, following the liberalisation, the premium rates for Motor Comprehensive and Motor Third Party, Fire and Theft products are no longer based only on the vehicle’s model, age and engine capacity.

The premium rates are based on the profile risk of policyholders which includes their driving records and claims history. These subjective assessments differentiate the premium rates offered by insurance companies and takaful operators.

More insurance and takaful options with a range of prices

Following the liberalisation, consumers can expect the premium rates to vary across insurance providers and takaful operators even though the policy cover is the same.

Example: You may find that Company A offers insurance coverage at a lower price that fits your budget and needs. On the other hand, you may find that Company B offers the same insurance coverage but a higher price.

Therefore, the liberalisation has afforded you the opportunity to compare premiums across insurers. Given the different premiums, it is always best that you shop around for the best insurance that fits your budget and needs.

Premium rates for motor insurance vary across insurance and takaful companies

Compare across insurers to secure the best coverage

You can easily compare insurers online. To do this, you can visit your preferred insurer’s website and get your quotations online.

Example: If you would like to get a quotation from Company A, you can visit their website and key in the required information to get your quotation. In order to secure the best insurance at the best price, it is advisable that you compare at least three insurers in terms of the premiums and coverages offered.

An even easier way to compare across insurers that can save your time is using insurance comparison sites such as MyEG and Bjak. Instead of having to visit multiple insurance websites, you can easily get quotations from different insurers all on a single platform in just a few minutes.

Does the implementation of liberalisation affect the existing NCD rate?

No. You will still keep your NCD. Besides, you can transfer it from one insurance company or takaful operator to another.

For your information, the NCD rates for private cars range from 25% to a maximum of 55%. Refer to our table below for the NCD rates.

NCD rates for private cars

Are third party insurance policies still offered following the motor tariff liberalisation?

Yes. Consumers who would like to opt for third party insurance policies are able to purchase them based on the tariffs.

Compare across insurers for the best coverage and price

As we have shared, following the motor tariff liberalisation, the premiums for Motor Comprehensive and Motor Third Party, Fire and Theft products are no longer subject to the previous fixed tariffs. Hence, as a consumer, it is always best that you compare across insurers to get the best car insurance or motor takaful at the most affordable price.

In order to easily compare across insurers, you can simply use Bjak, one of Malaysia’s biggest insurance comparison sites to compare up to 15 insurance brands for free. To begin, visit Bjak.my to get your free car insurance quotes online and choose the best plan that is most suitable to your needs and budget.