Last July, Bank Negara allowed insurance companies to set their own prices for the comprehensive motor insurance, a move known as motor detariffication or liberalisation of motor insurance.
Prior to this, motor insurance prices were fixed for all insurance companies, just like how our gas stations have the same price for RON 95.
Today, with each company setting different prices, it becomes necessary to compare them. In iBanding’s current motor insurance study, 45% out of 7,000 Malaysians said that they do not compare insurance prices. Only 15% of the respondents compare prices from more than three insurers.
This is surprising, because our study shows that prices of the cheapest and costliest insurance vary up to 22%. In other words, if your premium costs RM1,000, you could have saved up to a cool RM220!
With motor detariffication, one key change is that more insurers are now offering motor insurance online. Last October, only seven companies offered motor insurance online. Now, four more companies have joined the bandwagon.
In one of our random price tests conducted early last month, only seven out of 11 companies offered very different prices, while the rest maintained their prices. This study shows that many insurance companies are still following the old tariff model to determine their product pricing!
The quality of the insurers’ websites also varies from company to company. Takaful Malaysia, Etiqa, MSIG and Tune offer simple and easy-to-use webpages. Meanwhile, the websites of Liberty, Berjaya Sompo, Axa Affin and Takaful Ikhlas have room for improvement. Buyers, especially those who aren’t very insurance-savvy, may find it difficult to make their purchases here.
Currently, there is no easy way to compare insurance prices. Malaysia has 26 motor insurance companies, and a comprehensive comparison website like those in the Europe or the US does not exist yet.
If you want to compare by going to the insurers’ webpages directly, here are a few tips for you:
Tip 1: Focus on the sum insured
The sum insured is the value of the car that you want to insure. Many companies allow you to adjust the sum insured to suit your needs. You may want to match the sum insured to the outstanding amount of your car’s bank loan. The sum insured is the key factor that determines the motor insurance premium. If you want to compare the premium accurately, ensure that the sum insured is the same.
Tip 2: Watch out for hidden products and fees
Many companies like to add additional fees during checkout. In the early days, low-cost airlines automatically added travel insurance to unsuspecting customers who purchased their flight tickets online. Insurance companies do the same, so keep a close eye on additions that you do not want.
Tip 3: Know when you get 10% direct discount
When you buy insurance directly from the insurance company’s website or its counter, you receive a 10% discount in return for not using an insurance agent. However, when you buy from websites run by bigger insurance agents like MyEG and House of Insurance, you do not get the same discount, even though it feels like you are buying directly because you are entering the information yourself.
Tip 4: Know what you are getting when buying direct
When you buy your motor insurance online, you save 10% on the price that would normally go to an insurance agent. If you know a lot about insurance and how to claim from an insurer, you can buy online. Otherwise, buying insurance through an agent is probably the easiest way. A reliable agent will help you in all matters relating to your motor insurance, from renewing your policy, to helping you with the claims process.
Tip 5: Compare the service level
When companies set their own prices, their service level will differ accordingly. Companies that offer cheaper insurance might not provide the nice extras that more expensive insurers offer for free. For instance, AirAsia tickets are usually cheaper than Malaysian Airlines’, but food and checked-in luggage will cost extra. So, look at the total cost of the services that you need. An expensive insurance policy with lots of extra add-ons might be more expensive, but it may turn out to be handy when you have an accident or need help.
Now, you are all set to make Motor Detariffication work for you, while potentially saving a few hundred ringgit in the process!