Page 226 - Contributed Paper Session (CPS) - Volume 1

CPS1283 Kelvin H.C.Y et al.
Practicality
The selection of rating factors is a balance between practicality and
accuracy. Adopting more rating factors would help refine the accuracy of the
insurance premium but at the risk of customers being discouraged by the
number of required questions. Adopting less rating factors would be practical
for business purposes but introduces the risk of adverse selection due to
inadequate information.
In addition to the technical premium computed by the actuary, due regard
also needs to be given to market competition and customer retention
elasticity.
The application of the +/-10% cap and cup for Motor insurance products
helps ensure a gradual transition to market-based pricing, however, it may
introduce scenarios where different risk profiles are being charged the same
premium (i.e. at the cap/ cup).

New products
Innovative general insurance companies have taken the lead to introduce
various new products as allowed under the Phased Liberalisation of Motor and
Fire Tariffs policy document.
The policy document specifies new products as
(a) a new type of Motor or Fire cover (inclusive of any add-on
cover), that is not defined under the Tariffs; or
(b) any Motor or Fire product, which incorporates new or
additional features or components not defined under the
Tariffs; or
(c) any variation to, or extension of any cover (inclusive of any add-
on cover) defined under the Tariffs.
The introduction of new products, such as smart key coverage, limited
special perils coverage, and e-hailing coverage, gives customers a wider choice
to tailor their insurance solutions to meet their specific individual needs.
A new product can only be introduced to the market after the policy
wording for the new product has been approved by the relevant industry
association.
Bank Negara Malaysia’s approval is required for Motor new products with
the following features:
a) new exclusions, limits, or other terms resulting in reduced
coverage compared to products defined under the Motor
Tariff;
b) term or duration of cover that is shorter or longer than a
continuous period of 12 months;

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