PETALING JAYA: Rewarding safer drivers with lower motor insurance premiums could help improve road safety in Malaysia, but stakeholders stress that any risk-based pricing model must be introduced transparently and with strong regulatory safeguards.
Federation of Malaysian Consumers Associations (Fomca) secretary-general T. Saravanan stressed the need for strong checks and balances, independent oversight, transparent claims procedures and accessible grievance mechanisms.
He said risk-based pricing models for motor insurance can be beneficial if implemented fairly, transparently and with proper regulatory oversight.
“Safer and more responsible drivers should be rewarded with lower premiums, rather than subsidising high-risk drivers through a broad pooled system.
“Consumers should have the right to know how their risk score is calculated, avenues to challenge inaccurate information and how insurers ensure fairness in pricing decisions.
“The framework should ultimately encourage safer roads, maintain affordability and protect consumer rights,” he said.
The timing of such reforms must also be considered carefully, he added.
“Any move that potentially increases motor insurance costs for certain groups of consumers could place additional financial strain on households.
“This is especially for the lower and middle-income groups who are already struggling with cost-of-living pressures.
“While we support efforts to improve road safety and encourage responsible driving, any implementation of risk-based pricing must be gradual, transparent, consumer-centric and properly regulated by Bank Negara,” he said.
Road safety expert Assoc Prof Law Teik Hua said drivers can be constantly reminded of the link between their driving styles and savings on insurance premiums through risk-based pricing models.
“This is also likely to result in safer driving practices, including more disciplined driving, better adherence to the speed limits and a lesser likelihood of accidents,” he said.
Law, who heads the Road Safety Research Centre at Universiti Putra Malaysia, said some loopholes and behavioural consequences may, however, develop depending on the policy’s design.
“Motorists may not report accidents to avoid an increase in their risk score.
“Instead, they may privately settle and such accidents will remain unreported, having no effect on risk profiles.
“Although it will lower the statistical number of claims, it can undermine the quality and completeness of the database.
“Also, drivers’ reaction towards the scheme might be rather negative, as they will see it more as a punishment rather than a means of correcting their mistakes when pricing increases are too much,” he said.
Law also said data governance cannot be disregarded.
“Reliable coordination between insurance firms, enforcement agencies and the corresponding databases is essential.
“Any errors in this process can lead to disputes on risk scores and pricing.
“Moreover, privacy concerns can arise once telematics are implemented,” he said, adding that socioeconomic issues must also be taken into consideration.
Law also stressed that risk-based pricing must be viewed as part of a wider road-safety system incorporating enforcement, driver training, road design and behavioural change techniques.
