New Motor Cover Framework Finally Comes

When I worked with composite insurance companies (i.e. doing both life insurance and general insurance) some years ago, I involved in analyzing claim experience for each product line and calculating IBNR (Incurred but not reported) reserves. Every time I looked at the terrible loss ratio of “Motor (ACT)” and “Motor (Others)” classes, I would pray for the detariff of motor insurance premium rates coming as soon as possible.

I’m glad to hear Bank Negara Malaysia’s (BNM) announcement via its press release on 6 January 2012, revealing the New Motor Cover Framework. According to the press release, the gradual revision in the Motor Tariff premium rates will be implemented effective from 16 January 2012, over a period of four years (2012 to 2015). The Framework will pave the way for detariffing of the motor insurance premiums in 2016, in which premium rates will be further differentiated in accordance to the risk profile of individual vehicles and fairer to vehicle owners as those with good claims experience would enjoy much better premium rates than those with higher risk profile.

Although the detariffing is not implemented immediately, I believe the gradual annual revision will gradually improve the room for general insurance companies to continue to breathe – the existing tariffs has been in place for more than 30 years (such as long time!), which are definitely not reflecting the current experience. Implementing gradual annual revision is a good strategy, which will help to reduce the objections from public and prepare the public for the “true” premium rates of motor insurance. For example, the premium adjustment for a private car of 1,400 cc, will be between RM6.00 - RM34.00 per year, which may looks less burdensome to the public. As motor insurance significantly affects the mass (the level of car ownership in Malaysia is very high – “thanks” to the inefficient public transport), any drastic increase in premium rates will definitely translate to the reputation risk and PR challenge to the insurance companies. Just like health insurance, the insurance companies are easily described as the “bad guy” that “bullies” the “helpless” public.

On the other hand, the detariffing of motor insurance will definitely create additional job opportunities for general insurance actuaries. I can see more and more actuaries with general insurance qualification emerging. Actually this phenomenon also benefits the general insurance industry, by having more general insurance actuaries, the general insurance companies will be able to improve the soundness of product design and management.

Look forward to the first implementation of revised Motor Tariff premium rates on 16 January 2012.


Reference:

Comments

Post a Comment

Popular posts from this blog

Other Ways to Prepare Prophet Model Point Files? Try FoxPro!

Image
If you are a frequent Prophet user, you must be definitely familiar with "Model Point Files" ("MPF"), i.e. the policy data that you compile in a specific format that Prophet can recognize as inputs for Prophet runs. If my guess is right, most probably you use Data Conversion System ("DCS") to convert the source data you download from your policy administration system (may be in various format, e.g. fixed ASCII / fixed width, comma delimited, tab delimited, etc.) into the required MPF, based on the definitions you specified in your DCS programs. In case your source data are divided into various files, you may need to carry out more steps to prepare MPF, for example: Open different source files in Excel Combine required fields from different source files by using commands (such as) VLOOKUP, SUMIF & MATCH. You may have automated this process by using VBA. Convert the required files into text files Use DCS to convert those text files into MPF  How...
Read more

How do You Setup Indicators in Your Prophet Model?

Image
In my previous post, I have discussed areas that you may consider in setting up input variables . Before I proceed my discussion on core variables, I would think that it is good for use to take a look on indicators - as indicators play an important role in setting core variables with various formulas (known as "variable definitions" in a Prophet model).  The funny thing about indicators is: it DOES NOT carry any formulas that you need to use in calculating a variable! Basically, they are just some texts that you can combine using different logical operators (AND, OR, NOT), such as "ORD_PAR AND SING_PREM" for a single premium ordinary participating product. 
Read more

How Should I Do My UAT? (1): Program / Spreadsheet / Model

Image
If you are working in the actuarial department of an insurance company, it may not be uncommon to you involving in various testing exercises, which are known as User Acceptance Testing ("UAT") in general. Some of us may think that UAT is only applicable to the policy administration system implementation project (Oops... Do I remind on the non-stop follow-ups from your Project Manager?), but in fact UAT is also needed for the programs, spreadsheet templates or actuarial model we use to perform various actuarial studies - whether they are developed internally or by external consultant. It is particularly important for those tools which we are going to use to perform regular studies. In my view, there is no one right answer for the approach to be used in performing UAT on program / spreadsheet / model - most importantly, the approach that you adopt should allow the required testing to be carried out in a structured manner, and it should not create too much "processes...
Read more