Focus View
Combating fraud will reduce insurance premiums
FocusM team | 01 Sep 2017 00:30
The first half of this year has been tough for the motor insurance industry. It suffered a net loss of RM225 mil compared with a net profit of RM66 mil in the previous year.  

During this period, general insurers paid RM2.68 bil in motor insurance claims which works out to RM14.7 mil in claims paid per day.

The high claims must be worrying insurers. It is not surprising that some of them are thinking of exiting the general insurance business. 

Not only are claims rising, insurers’ incomes are dropping. Gross written premium income for the first half of the year stood at RM9.17 bil, down from RM9.34 bil previously.   

Although the first six months saw a 25% drop in vehicle thefts, the high accident rate continues to be a worry. Fraud, too, has to be addressed.   

It is hoped the Fraud Intelligence System (FIS) to be launched soon will help reduce fraudulent claims. The system will help expose fraud syndicates by providing leads for investigations.

It will be interesting to see if the FIS will work. After all, general insurers have for the longest time been fighting a losing battle against fraud. 

Vehicle theft is rampant. Adjusters are often in cahoots with repair workshops to defraud insurance companies. Although insurers set up their own panel of workshops, the fraud still continues. Allianz General Insurance Company (Malaysia) Bhd stopped bogus claims worth RM5.6 mil between 2014 and last year.   

If the relevant authorities such as Bank Negara do not step in, many general insurance companies may soon exit the industry. With fewer players and less competition, the remaining players will tend to fix premiums.  

Already, the Malaysia Competition Commission (MyCC) earlier this year proposed to fine the General Insurance Association of Malaysia (PIAM) and its members RM213.45 mil for violating the Competition Act. Insurance companies have denied this.

Since July 1, premiums for vehicles, fire and theft have been liberalised with pricing to be determined by individual insurers. Good drivers will be rewarded and bad ones penalised through higher premiums. But many consumers feel the liberalisation isn’t quite happening in the form of lower premiums. 

At the end of the day, it is up to general insurers to manage fraud and reduce their costs to ensure consumers get a better deal.