Motor insurance to cost more?

WEALTH PROTECTION

Under the new motor insurance framework, the Malaysian government plans to gradually increase insurance premiums from 2012 onwards, says a source

Vehicle owners may have to pay more for their motor insurance premiums from next year as the government plans to remove motor insurance tariffs in 2016.

Bank Negara Malaysia (BNM), tasked to prepare the new motor insurance framework, informed this at a recent meeting with various stakeholders involved in the new scheme recently.

"Under the new motor insurance framework, the government plans to gradually increase insurance premiums from 2012 onwards," a source who attended the meeting told Business Times.

He said the government has agreed to do away with tariffs for the motor insurance business in 2016, in line with the liberalisation objectives of the Financial Sector Masterplan.

"Gradual annual premiums adjustment for bodily injury portion will start next year, in tandem with the enforcement of The Competition Act 2010. Hence, fixed motor premiums are considered anti-competitive agreements and will be lifted," he said.

For motorists already grappling with rising fuel prices over the years, the premium hike would not be welcome news.

Depending on the class and overall claims history, motorcyclists and car owners may see premiums rise by about 250 per cent and 450 per cent respectively, the source said.

It is understood that a joint working committee will be formed, consisting the police, hospitals, the Bar Council, legal aid bureau and the judiciary, to work on the broader framework.

BNM was to submit the final proposal for a new basic third-party motor cover scheme framework to the government in December after receiving feedback from all parties, including the public.

It is learnt that the current level of coverage for bodily injury will be maintained with no caps on compensation.

Business Times reported in April last year that the government was looking at limiting liability of motor insurers to third-party claimants to RM2 million, with insurers and the government acting as co-owners of a new company (newco) that would underwrite third-party injury risks.

The idea was blasted by the Bar Council who claimed that the legal fraternity was being sidelined by the regulator.

The current motor insurance rating structure dates way back to the 1950s and has remained unchanged since it was last reviewed in 1978.

But insurance companies have long lamented the unprofitable nature of underwriting third-party motor insurance covers, pointing out that the low premiums do not commensurate with surging vehicle theft and escalating claims costs, including those of repairs and court awards.