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Sunday, March 20, 2011

Insurance premium rate increases over 4 years

Insurance premium rate increases over 4 years

Bank Negara Malaysia has issued a statement on motor vehicle insurance coverage which has been of particular concern to motorists owning vehicles older than 10 years. The bank says that it will provide a holistic solution to the issues that has been raised. A new framework will address in particular the concerns of high premiums and difficulty in having access to motor cover. A two-pronged strategy has been adopted to enhance efficiency in the provision of motor cover with a gradual price adjustment that will ensure that the public is able to purchase motor insurance at affordable premiums, benefit from a much better service and secure early compensation.
The tariff that has not been revised for more than 30 years has been a major source of the difficulties faced by the public in these recent years. While the premium has not been adjusted, there have been significant increases in the level of car ownership, accident rate and claims. Under the new framework, insurance premium adjustments which will take effect from January 1, 2012, will be small and implemented gradually over a period of 4 years.
The bank gave two examples of the new framework. For Third Party cover of motorcycles of 110 cc, there will be a premium increase of between RM1.00 - RM3.50 per year (a maximum of 30 sen per month) over the next 4 years. For a privately-registered car of 1400 cc, the premium adjustment will be between RM6.00 - RM34.00 per year (a maximum of RM2.80 per month) over the same period. For commercial vehicles such as outstation taxis and buses, the impact of the premium adjustment on the passengers would be minimal at less than 10 sen per passenger. Categories of vehicles such as hire and drive taxis which have good claims record will benefit from a reduction in premiums or lower quantum of increase in premiums.
With the new framework, there is to be immediate implementation of critical measures to enhance efficiency in claims settlement including the establishment of a nationwide 24-hour call centre to provide immediate roadside assistance to accident victims, facilitating early and simpler claims notification, shorter timelines to produce police and medical reports, and enhancing public awareness on making more prompt motor insurance claims. These enhancements are expected to significantly reduce the average claims settlement period from the present 1 - 5 years to between 6 - 18 months.
A Joint Working Committee (JWC), chaired by Bank Negara Malaysia comprising representatives from key Government ministries, the insurance industry and consumer and business groups will oversee the successful implementation of these identified measures.
Bank Negara will review the problems owners of old cars face when buying insurance cover
Currently, some private vehicle owners have been subjected to high premiums arising from policies purchased from the Malaysian Motor Insurance Pool (MMIP), which is the insurer of last resort. While this had been widely highlighted and reported, Bank Negara says that this accounts for only about 2% of the total number of vehicles insured in Malaysia and comprises mainly private cars of more than 10 years old. To address this issue, the rules and operations of the MMIP are being reviewed to ensure that these motor vehicle owners are not necessarily deemed as ‘high-risk’ and will have greater access to motor cover at a lower premium. For the pure high-risk vehicles, access to such cover would be available through the MMIP but will be subject to the appropriate premium commensurate with the risk. 
Responding to complaints that many motorists are forced to buy other types of insurance polices when purchasing their motor cover, Bank Negara states that it prohibits insurance companies from compelling policy owners to do so. The bank will take stern action on such errant companies (but motorists would obviously have to make an official complaint for action to be taken). Since 2009, a total of 37 complaints on ‘forced selling’ were received and action was taken on the insurance companies that have resulted in premiums being refunded to the policy holders, the bank revealed. Members of the public who have difficulty obtaining motor cover or who have been compelled to buy other forms of insurance are advised to contact the Bank Negara Malaysia hotline directly at TELELINK: 1 300 88 5465.

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