Add-ons lead to high premiums

SINCE the insurance market was liberalised and the motor tariff dismantled last year, motor
insurers in Malaysia have been able to charge premiums for insuring cars based on “risk factors”
subject to certain guidelines and limits imposed by Bank Negara Malaysia. This is to ensure that
motorists will be charged a fair premium based on their individual risk factors.

As a consumer and motorist, I expected the insurers to introduce improved motor policies that
provided more benefits without increasing the premium significantly.

Instead, they have retained the policy that was marketed before liberalisation and detariffication
and introduced more “add-ons” to widen the cover under the standard policy. All these add-ons
require payment of additional premium and thus increase the total amount payable by the
motorists.

In a liberalised insurance market, motorists expect to see competition among insurers in offering
better products and services at affordable premiums. Instead, motorists are now having to pay
more to have wider cover under their policies.

Add-ons are those which provide additional cover, such as special perils to take care of flood and
other convulsions of nature (pic), windscreen, legal liability to passengers and of passengers,
waiver of betterment contribution, waiver of compulsory excess, increase in limit for towing
charges, no claim discount protector, increase in limit for third-party property damage claims and
many more.
Many of these add-ons may be incorporated into the standard policy with a small increase in the
premium since insurance rating is based on the “law of large numbers”. Why this is not being
done baffles me. All I can think of is that insurers are able to rake in more premiums using add-
ons instead of widening the cover using the “law of large numbers” methodology of rating.

I hope Bank Negara will seriously look into the matter to protect the interests of all motorists in
this country. We want better cover at affordable premiums.

HUANG HENG HWAI

Petaling Jaya