You Could Be Paying Higher Car Insurance Premium Due To These Reasons
Effective July 1, 2017, insurers offering car insurance will consider more factors when they are underwriting your car insurance policy. This means potentially higher or lower premium when you are purchasing or renewing auto insurance.
This falls under the second stage of the Phased Liberalisation of the Motor and Fire Tariffs announced by Bank Negara Malaysia last year.
Currently car insurance focuses on the type and age of the car, the driver’s personal details such as age and gender, as well as the number of claims made.
With the detariffication, all of these will still come into play when the insurer is determining your premium, but additional factors will be considered as well. This is so that insurance companies can offer a more competitive premium that is specifically tailored to consumer needs, and encourage greater innovation in the industry as well as provide sustainable protection for drivers in Malaysia.
Although the full list of factors are not released or confirmed yet by the authorities, here are some that have been pointed out thus far.
How many traffic offences you’ve committed
Think those speeding and parking summonses you’ve accumulated years ago will not come back to haunt you? Think again. The upcoming changes reported will see you having to pay more in the future. According to Zakri Khir, Chief Executive Officer of Allianz Malaysia Berhad, the data for traffic offences is made available to insurance companies in most of the matured markets.
With this information made available, only those who rarely get or don’t get any summonses have the upper hand. They are able to get lower premiums due to a good traffic record. But will it be available any time soon?
Not really, said Zakri. In fact, most companies do not have access yet, so it might take some time for Malaysia to move into this direction.
But that doesn’t mean you should take it easy, drivers. Best to keep your act as clean as possible to get better premiums in the future!
Safety and security features of the vehicle
The model of your car has always played a role in the overall premium, but it mainly involved looking into your car’s market price and engine capacity. With the changes in premium, this will now include the safety and security features in your car.
Not all car models have the option of adding on safety and security. Even if your car model has the option to add-on safety features, you may still opt out of it as it tends to cost more. But if you opt in for these extra features, the savings from your motor insurance premium in the long run may be worth the one-time investment.
Zakri has mentioned that insurance companies may also ask customers to declare any additional safety and security features that will offer a lower premium. So if you really want to lower your premium, spending more to keep your car safe may be a good option to look into.
How likely is your car to be stolen
You may want to get that Proton Wira or Toyota Hilux for a variety of reasons, but once you do, your premium on your car insurance will go up. Cars that are in the list of most likely vehicles to be stolen are, of course, a risky car to insure. This means that you will have to pay more for owning a car that’s high on the stolen list.
There are statistics available on car thefts that is provided by the industry and Zakri has also confirmed that car insurances have their own data from their claim history to refer to. Before you buy a vehicle, it’s best to check if it’s on the list.
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Geographical location of the vehicle
The geographical location will also play a role in how the premium will be calculated. How will this be determined? According to Zakri, it will depend on the address, usage of the car and where your car is registered.
Depending on these factors, your premium will likely go higher or lower, as it determines how safe the car is at these locations. Just like how your premium is affected by the model of the car according to the list of stolen vehicles, your premium will also be determined by the locations that have a high chance of car theft. So if you park or drive at a place that’s considered risky, you will be slapped with a higher premium.
Duration and driving style on the road
This one isn’t a set factor for now, but it will be considered with the introduction of a new technology that can help track the duration of vehicles on the road. Discussions on the use of telematics is still ongoing, but the purpose of it is to track down a driver’s driving style.
With this data, insurance companies can lower the premium for drivers with good driving habits. The presence of the telematics will also allow insurers to develop products that can be catered to different groups to improve efficiency and pricing strategies.
As this will take some time to set up, this will likely not be happening any time soon. But in time, this could be possible and not only will this affect your premium, it could also make you a better driver!
Here is the take away
The whole point of liberalising the auto insurance industry is to spur a more competitive market for consumers. This means consumers will now have the option of lowering their insurance premium for their vehicle by being a better driver or doing their due diligence in comparing products in the market.
Still, these factors aren’t completely being used for now. According to Zakri, these listed factors all depend on the claims aspect and loss ratio which will differ by different risks. Not all the factors will have similar impact, but the likelihood of car theft and geographical location is one of the more significant factors.
These new factors could work to your advantage or disadvantage. So, do your research and make better comparisons when you are shopping for car insurance in the future!