KUALA LUMPUR: Price war and competition between the insurance companies will likely occur following the liberalisation of motor and fire tariffs from July 1, 2017.
The prices for the products will be liberalised and the “licensed persons” will be able to determine the premiums or takaful contribution rates for them.
Actuarial Partners Consulting Sdn Bhd partner Nurul Syuhada Nurazmi said the companies that were well-capitalised would be able to withstand the price war as they had enough buffer and profits to cover their deposits.
“Some insurance companies have started gearing up to obtain the market share now,” she said, adding that others might purposely cut rates to gain market share despite realising the rates were already low and not profitable.
“If you have a business that is profitable, you can always cut the rates further until it reaches break-even point.
“Some companies which don’t have adequate money to pump in would sell off their businesses,” she told reporters after her presentation on “General Insurance Industry Future Landscape” at a one-day seminar here today.
The seminar on “Detarification: Succeeding in a Competitive Environment” is jointly organised by the Malaysian Insurance Institute (MII) and Actuarial Partners.
Nurul said it was completely up to the insurance providers to price their products as they saw fit to attract consumers.
She said the liberalisation would encourage the increase in the number of new insurance products and customers, but would also create competition.
“Too much competition could be destructive to the market like what happened in India and China when liberalisation started, it went bust,” Nurul said.
However, the overall impact to the insurance industry was still too premature to be determined at this stage, she said.
From 2019, the progress and impact of the phased liberalisation would be evaluated to determine the readiness of consumers and the industry for further liberalisation, she said.
MII Chief Executive Officer Syed Moheeb Syed Kamarulzaman said the motor insurance premiums would soon be based on a list of risk factors, instead of the current overly-simplified and regulated pricing policy.
“This will provide an early platform for insurers to refine their offerings and pricing policies, while consumers get additional choices to fit their individual needs,” he said.
Going forward, Syed Moheeb said, the insurance industry would likely see moderate growth this year on the back of slowdown in demand in the car industry.