PETALING JAYA: Motorists have started paying higher car insurance premium effective Jan 16, the first rate hike in 30 years.The quantum of increase was calculated so as not to burden consumers, industry players said, but the steady hike over four years is expected to be a big boost for the motor insurance business.
Analysts said the revision by Bank Negara Malaysia (BNM) is positive for the general insurance sector as it will enable them to trim their losses in the motor segment.
Jupiter Securities head of research Pong Teng Siew said previously, most general insurance players have exited the motor insurance business because it was not profitable.
"This new tariff will be benefiting motor insurance players and will make the business more attractive and profitable. The tariff has not been changed for nearly 30 years. So, I think it is timely ... the revision in the tariff will prosper the industry," Pong told SunBiz.
"The motor claims ratio was high in the early 90s. In 1990, it was at 91pc and dropped to 66.3pc in 2005. It has stabilised at that level and not much of an improvement was seen. This has led industry players to exit the motor insurance segment," he said.
He said the industry's underwriting margin was at zero or negative level for many years and with the revision in the motor tariff rates, the underwriting margin is expected to turn positive.
According to BNM's statistics, total premiums made by general insurers in 2010 were RM12.6 billion while net claims paid during the year came to RM5.8 billion, representing a claim ratio of 80.9pc.
An analyst with a local research house also said the revision will generally benefit motor insurance players and will help to mitigate their losses.
"The growth is not as high as life insurance but the general insurance (sector) has been recording a healthy single-digit to low double-digit in gross premium over the last five years," she said.
She is optimistic that the hike will have a positive impact on the general insurance sector and it is likely to register positive growth in the next few years.
Meanwhile, the General Insurance Association of Malaysia (PIAM) executive director Lim Chia Fook said the new motor tariff will enhance efficiency in several aspects, especially the claims settlement process, faster turnaround for personal injury claims while introducing motor insurance claims kit to inform on an accident and monitor the claims process.
Lim said the adjustment to the premium is small and will be reviewed periodically.
"The gradual increase over four years ... the current first-year adjustments are relatively small and will not be adequate to overcome the current high loss ratios in the motor third party bodily injury claims sector," he said.
BNM said in a statement the revision will be gradual and the impact on the motoring public and businesses will be marginal.
It is the first revision in more than 30 years, despite the fact that car ownership, accident rates and number of claims have risen significantly over the years, thus putting cost pressures on the industry.
