5 Key Points About Phased Liberalisation That People Need to Know

Malaysia was in the news recently for the phased liberalisation of their motor and fire insurance. The phased liberalisation is an initiative taken by the government of Malaysia to deregulate the tariffs and premium rates.

According to recent insurance news, it is believed that with detariffication, consumers will have access to a wider range of products and improved services at better prices. The phased liberalisation will affect many different aspects of the insurance industry in Malaysia and its repercussions may not be immediately obvious to the casual observer. For a clear understanding, here’s a look at the key points of the phased liberalisation:

1. What is the difference between a full-fledged and a phased liberalisation?

In a full-fledged liberalised market, insurers evolve from rule-based underwriting system to risk-based decision-making structure immediately. In a phased liberalisation, insurance companies can model their risk-based pricing accordingly. The premium the rates can be capped at -10% or +10% of the premium that you are charged by the insurer upon renewal. With passage of time, the cap would gradually increase and will be removed completely, thereby achieving a fully liberalised motor and fire insurance market. Apart from that, under the phased liberalisation policy, only third party policy will be subjected to tariffs or fixed premium.

2. What is risk-based pricing?

Insurers can determine the premium you will pay for the policy on the basis of risks. The factors include gender, occupation, experience in driving, make and model of the car, location of residence, and your claim history. It means that more positive factors in the profile will help in enjoying lower premium.

3. How will insurers decide on the premium price?

Each insurer has their own set of risk factor based on which they will conduct their analysis for developing their perception of risks and use it to come up with their risk-based pricing method. It will help them in calculating premiums.

4. How will it impact the consumers?

There is no reason for consumers to get worried. In a liberalised market, consumers will enjoy better premiums when they have a low-risk profile. Considering how a good claim history can affect your premium, this could even make you a better driver indirectly. It will also lead to healthy competition amongst the insurers to come up with better products to win over more customers.

5. How will phased liberalisation impact insurance companies?

It all comes to free competition, more product differentiation, fairly-priced premiums, and emphasis on customer satisfaction. The insurance companies can now charge the premiums based on the risk-profile of the clients.

Explore the web for more information and articles about insurance news in Malaysia to stay updated with latest happenings and trends about motor insurance industry.

Peter is a technical writer and insurance customer service officer. He writes for online blogging sites mainly related to auto insurance and car insurance.