MOTOR INSURANCE RESULTS 2002-2009
The following report presents a summary of the performance and results of the Malaysian motor
insurance portfolio for the past 8 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% |
| 2009 |
292.4% |
91.4% |
112.0% |
- "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 own property damage, theft and third party property damage.
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 292.4% in 2009. The loss ratio of the "Motor - Others"
component of the portfolio remained relatively high but stable at an average loss ratio
of 90.5%.
As a result, on an overall basis, the motor insurance portfolio was unprofitable in 7 out
of the last 8 years under review, with the combined loss ratio easing slightly to 112.0%
in 2009 from 115.5% in 2008.
The ultimate combined loss ratios for various categories of vehicles that contribute to
the adverse results based on an actuarial study for 2005 to 2007 were as follows:-
Claims Experience by Combined Loss Ratio, %
| Policy Type |
Year |
Motorcycle |
Private Car |
Goods Carrying Vehicle |
Taxi |
Hire Car |
Bus |
| Comprehensive |
2005 |
111 |
91 |
116 |
41 |
31 |
140 |
| 2006 |
131 |
94 |
126 |
50 |
30 |
167 |
| 2007 |
141 |
110 |
141 |
57 |
36 |
164 |
| |
| Third Party |
2005 |
120 |
197 |
240 |
216 |
184 |
406 |
| 2006 |
149 |
219 |
279 |
311 |
153 |
426 |
| 2007 |
180 |
257 |
311 |
317 |
280 |
416 |
The Motor Insurance Tariff premiums have remained unchanged for the
last 32 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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