Higher loading by two motor insurers - MAA Assurance and AmAssurance cite high claims, falling car values

22 June 2007, By The Star By DALJIT DHESI

PETALING JAYA: Malaysian Assurance Alliance Bhd (MAA Assurance) and AmAssurance Bhd are believed to be raising their motor insurance premiums, citing high claims, declining car value and a surge in labour costs.

It isy learnt that the two large insurers have already sent circulars to their respective agents informing them of the higher loading on motor premiums.

Sources told StarBiz that the revised loading would take effect at MAA Assurance by end-June and at AmAssurance next month. A higher loading meant increased motor premiums.

AmAssurance, where privately owned cars compose more than 90% of the portfolio, has not previously imposed any comprehensive loading but has done so for third-party coverage about six months ago.

As for MAA Assurance, it imposed loading on commercial vehicles and third-party motor coverage at the start of the year.

Loading structure now comprises comprehensive and third-party coverage with a fixed ceiling attached.

Currently, the two players each command close to 15% of the local motor insurance market. Among the motor insurance players, Kurnia Insurans (M) Bhd is the largest with about 30% market share.

Sources said the planned increase in loading would be in line the current practices of insurance companies, which is based on the age of the vehicle, age of driver and claims history.

An official at Kurnia said the company was still studying the matter and assessing the market before deciding on the premium loading. He did not give further details.

The official said Kurnia's third-party premium loading came into effect on June 1. For comprehensive loading, the most recent hike was about two years ago but it was not across the board.

“We expect other insurance companies with significant motor portfolios to raise premiums in the next few months. According to Bank Negara statistics, the claims ratio in the motor business last year exceeded 71%.

“If one were to add distribution costs and administrative expenses, the combined ratio on motor business would exceed 95%, hence leaving very little margin for insurance companies,” a source said.

An insurance company official said his firm was looking at imposing higher comprehensive loading, based on its claims experience.

“Motor claims ratio at the company increased to 75% in March 2007 from 66% in March 2006. We also feel that most of the other players in the industry are suffering the same fate.

“The company's high claims ratio is largely due to the increase in the frequency of accidents and severity of claims cost per accident, particularly involving younger drivers.

“The situation has been made worse by the drop in the market value of cars and the increase in labour costs,” the official said.

An MAA Assurance official said because of increased auto theft cases and poor car sales values, individual companies may impose higher loading.

“It is estimated that close to 25% of MAA Assurance's auto claims comprise theft and we foresee higher motor premiums, moving forward,'' he noted.