Know How Auto Insurance Companies Calculate Risk for Individual Driver

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The insurance industry is all about calculated risk. Car insurance companies in Malaysia calculate premium rates based on how you are likely to make a claim in the future, and they use a number of factors to determine that risk. Malaysian insurers may use a different set of factors to calculate risk and determine premium rates but when you know the most common rating factors, you can shop smarter for your motor insurance. Check out this guide to understand how insurance risk assessment is done and how it may affect your current policy's premiums.

Liberalisation of motor insurance by Bank Negara in July 2017 has allowed insurers to calculate premiums based on driver’s risk profile. Risk-based pricing will make more customers alert drivers. This is due to the fact that in the future, good drivers will be rewarded and bad drivers will be penalised. Liberalisation has introduced some other factors too that will also affect premium.

• Vehicle make and model: There are certain vehicle models in Malaysia that are more prone to theft and so they are perceived to carry more risk than other models. These cars will be more expensive to insure.

• New cars with security features: A vehicle with additional safety features has a lower risk of theft and accidents than those that lack such features. The premium rate for such cars therefore, is lower.

• Driving experience and behaviour: A young male driver will have to pay more than a driver with more years of driving experience. A driver with no record of traffic violence enjoys a lower premium than a reckless driver with traffic offences on the record.

• Demographics: Driver under 25 years old and those over 65 years old are more likely to be involved in accidents. Men are also more likely to be involved in accidents than women and therefore young men will pay higher premiums on average. Marital status also affects your rates; married individuals are at lower risk than single adults.

• Credit Score: Low credit scores are also taken into consideration in your risk profiling. If your credit-based insurance score is low, insurers consider that you are more likely to file a claim. Some auto insurance companies may look at your previous premium payment history and length of credit history.

Due to the varied factors used in insurance risk assessment and premium calculation, you can expect to have different motor insurance price among insurance companies in Malaysia. If you want to get the best deal in auto insurance, you should shop around for the right product and request for online quotes from multiple insurers. You can easily request a quote online for comprehensive, third party and third party fire and theft coverage from any of the 22 insurance and takaful companies licensed in Malaysia to provide insurance products. You can use PIAM’s Motor Product Selector to compare motor insurance prices, and decide which insurance is best suitable for your needs.

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