Following the well known quote of the HBO TV series Game of Thrones, “Winter is coming”. Except this time it is to Malaysia. If you are not familiar with the phrase, check out the GoT Wikipedia for the meaning of “Winter is coming”.

BNM has detailed the Phased Liberalisation for the Motor and Fire Tariff insurance business while PIAM is preparing to carry out roadshows to brief the insurance players. Just recently, Asia Insurance Review has published a post on Detariffication and highlighted that Price Wars are very much expected to happen in 2017.

Malaysia: Price war expected in wake of liberalised rates in ’17

In the post, price wars after the announced date of July 2017 are expected. It is worth mentioning that in Singapore, which went through Detariffication in 1998, experienced a drop in insurance prices even before the actual date of the launch of Detariffication in the country. Will the same happen in Malaysia? There is no telling, but Singapore is culturally closer to Malaysia, so there is a higher chance that we may follow in Singapore’s footstep rather than other countries such as India or China.

What do Price Wars mean for insurance agents?

Price wars and Detariffications will have 3 possible negative outcomes that could make work for general insurance agents harder.

Possible outcome 1: 20-30% less commission

Price wars means bad news for insurance agents. That is why we gave our article the title “Winter is coming.” Insurance companies will start to selectively lower insurance premium for Third Party Fire and Theft and Comprehensive Motor Insurance to capture more business from their competitors. This means that for certain groups of Malaysian drivers, the insurance premium will be lower. Lower premium means lower commission, so agents will earn less with the same number of policies. How much business will you loose? From other markets, such as Turkey, Singapore and China, we can say that premium can drop between 20-30%. It will hit hardest on insurance agents who mainly concentrate on motor business.

Possible outcome 2: More work to gather data from customers

Insurance companies will require more information to determine pricing. What is common practice already in other countries will now be introduced to Malaysia. Information such as gender, postcode, profession, parking area, etc. will be needed to determine the premium in addition to the vehicle data. This means more work for insurance agents to fill out and issue a motor policy.

Possible outcome 3: More work to compare insurance prices

Malaysia does not have insurance comparison systems that allows agents or customers to easily compare prices among insurance companies. If an agent wants to find the cheapest insurance for his clients, he/she will need to get a manual quote from all the insurance companies. This takes time and is not worthwhile to do. Even if the agent only wants to compare the insurance with 2 other insurance companies, the agents will need to manually key in 3 times the customer information into the different insurance systems.

Find out how much business is at risk

Take our short “Detariffication Estimator” Quiz to find out how much of your insurance business is at risk. It will give you an indication of how worried you need to be about Motor Detariffication.