MOTOR INSURANCE RESULTS 2002-2008
The following report presents a summary of the performance and results of the Malaysian
motor insurance portfolio for the past 7 years at the industry level.
Combined Loss Ratios by Year
| Year |
'Act' Cover |
Others |
Total |
| 2002 |
177.0% |
91.9% |
102.0% |
| 2003 |
197.2% |
91.0% |
103.3% |
| 2004 |
213.3% |
91.0% |
105.2% |
| 2005 |
193.9% |
86.3% |
98.6% |
| 2006 |
229.1% |
88.4% |
104.4% |
| 2007 |
277.1% |
92.0% |
114.1% |
| 2008 |
288.7% |
92.0% |
115.5% |
- "Act" cover refers to third party death or bodily injury risks as stipulated under Road
Transport Act, 1987.
- "Others" cover refers to risks other than those insured under "Act" cover including
accidental property damage and theft.
The deteriorating performance in the motor insurance portfolio is mainly contributed by the
Motor 'Act' cover component, where the combined loss ratio has continued to escalate
persistently from 177% in 2002 to 288.7% in 2008. The loss ratio of the "Motor - Others"
component of the portfolio remain relatively high but stable at a loss ratio of
about 90%.
As a result, on an overall basis, the motor insurance portfolio was unprofitable in 6 out of
the last 7 years under review, with the combined loss ratio deteriorating to 115.5% in 2008.
The Motor Insurance Tariff premiums have remain unchanged for the last 31 years since 1978.
There is increasing consensus amongst policy and decision makers that unless dramatic actions
are taken to restructure the motor insurance business in a holistic and comprehensive manner,
the business itself will become unsustainable.
Key factors affecting the deteriorating results of the motor insurance sector are:-
- Inflation of spare parts prices, repair costs, legal fees, adjustors' fees, cost of
claims administration, etc.
- Escalating court awards e.g. the highest court award was for RM9.8million.
- Vehicle thefts - the total number of stolen vehicles has increased significantly from
8,869 cases in 1997 to 46,330 cases in 2008 i.e. up 5.2 times over 12 years whilst
the quantum of claims escalated from RM135million to RM628million in 2008,
up 4.6 times in the same 12-year period.
- Fraudulent claims. These are fabricated or inflated claims perpetrated by syndicates or
various parties to insurance claims or even ordinary law-abiding citizens who take
opportunity to defraud insurers Based on a study, bogus and inflated insurance claims
cost the UK insurance industry over £1.6 billion a year and this would have
added 5% to every policyholder's premium. When translated to the local scenario,
the same 5% for insurance fraud will cost an additional RM500 million in premium
payments by policyholders in Malaysia.
- Risk Based Capital Framework requires that each insurer maintain a capital adequacy
level that commensurate with their risk profiles and was implemented from Jan 2009.
Insurers are generally required to provide for additional capital or risk charges for
their business risks. Inadequacies in premium ratings must be supported by higher
capital requirements and this is the scenario that many motor underwriters are
experiencing in the light of the deteriorating motor insurance results.
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