Are You Paying Too Much for Car Insurance?
As you renew your car insurance this year and stare at the amount on your invoice, you may stop to wonder – am I paying too much for car insurance?
We know it can be tricky to figure out if you're getting the best deal.
Maybe you've had one or two insurance agent friends who talked your ears up about a certain insurance product, listing down reason after reason it's the absolute best deal and you'd be crazy not to take it. Of course, this leaves you feeling totally confused and overwhelmed.
This leads to one of two scenarios:
Scenario A: You cave under the pressure and sign up, despite the fact it's only the first insurance plan you've looked at (and the last you ever want to look at), and despite the fact you haven't considered any other options.
Scenario B: You wave the white flag and walk away. You decide you'll settle for whichever provider your family and friends are using, praying you never hear another insurance sales pitch again.
Both of these scenarios are less than ideal.
So how do you know for sure you're getting the best deal possible?
According to the General Insurance Association of Malaysia (PIAM), motor insurance gross written premiums totalled RM 8.47 billion while 598,714 cars were registered in 2018. It is clear that Malaysians are pretty willing to pay a decent amount for their car insurance policies, but just how much should you be paying?
How much does car insurance cost in Malaysia?
Having an idea of what other Malaysians are paying for their car insurance may not be the best indicator of how much you should be paying.
A much better route would be to understand how premiums are calculated to figure out if you're getting a good deal.
Here are the factors that decide how much you'll pay for your car insurance premiums:
If you're a driver registered in Peninsular Malaysia, you'll be paying more for your car insurance than if you were registered in Sabah and Sarawak. This is due to the fact that there are more road incidents and accidents on roads in the Peninsular than there are in East Malaysia, carrying a bigger risk for insurers.
This refers to your car's engine power and is another factor that determines your car insurance premium.
Your car's gross value
The higher your car's gross value, the higher your car insurance. Repairs for more high-end cars are naturally more expensive than for more affordable car models. And since your insurer will be covering repairs in the event of an accident, your monthly premiums are guaranteed to be higher.
No-Claim Discount (NCD)
Every driver is entitled to a no-claim discount if they are yet to make a claim for an accident. And the good news is that every year you remain accident-free, you'll be rewarded with a higher discount rate.
Type of car insurance
Your car insurance premium also varies considerably depending on which type of insurance policy you opt for.
Choosing a comprehensive car insurance policy is normally more expensive than a third party insurance policy or a third party fire and theft insurance policy because it offers the most protection in the event of an accident or theft.
While it may be tempting to opt for the insurance policy that costs the least, always keep in mind that getting a policy with higher premiums and better coverage could save you more in the long-term.
How do I compare car insurance policies?
While you could always get a rough estimate of the premiums you'll be paying for your own vehicle, car insurance calculator quotes don’t always paint an accurate picture of what you’ll need to pay for your coverage.
The reason for this is that car insurance rates are based on quite a number of factors including your vehicle’s insured sum, the cubic capacity of its engine, the amount of “no claims discount” you’re entitled to, and the number of passengers you can carry.
These are just to name a few – and now, with detariffication, your age, gender and driving behaviour can also influence your premium amounts.
Plus, you’ll also be able to take add-ons such as protection for natural disasters like floods, windscreen protection or strike and riot coverage, which could increase the rates you pay depending on what types of add-ons you select.
Hence, a great place to start would be to take a look around at different insurance products in the market to see what’s available, as insurance premiums can vary quite a bit.
Try to better understand each policy's unique offerings and from there, you'll be in a better position to figure out which car insurance policy suits you best.
| See also: How to Pay Less for Your Car Insurance in Malaysia |
Why is car insurance so expensive?
You may have asked yourself why premiums for car insurance are priced the way they are, especially if it's a requirement by law. Premiums can range from affordable to pretty steep depending on which plan you opt for.
Car insurance, just like any other insurance product, is priced based on the risk it insures, and because Malaysia has one of the highest number of road accidents in Asia, it’s understandable that premiums can fall on the high side.
For instance, did you know, according to PIAM, in 2018, the motor insurance industry paid out claims amounting to RM 5.45 billion? That’s a whopping RM 14.9 million per day in claims paid out for property damage, bodily injury and vehicle theft.
As recently as 2015, PIAM statistics showed that the motor insurance industry saw losses of RM 292 million, a 75% increase from RM 166 million just the year before.
In other words, car insurance premiums are increasing to keep up with the sheer number of accidents on our roads in Malaysia. Yikes.
How to lower your car insurance premiums
The good news is, there are plenty of ways to keep your car insurance costs low. There's no reason you should be paying as much as everyone else.
Renew your car insurance online
Switching from buying your car insurance through an insurance agent to buying online could save you a pretty penny.
As an insurance agent is essentially the middle man in the insurance buying process, buying your insurance directly online saves you from paying the fee for his or her services.
The problem in Malaysia is that insurance agents earn commissions for the policies sold, meaning they have a huge incentive to offer you more expensive policies.
So while you may think you're getting the best deal, it's possible your agent is highlighting to you the policies that will earn them the highest commissions.
Of course, an agent does usually guide you through the types of coverage you'll need and adds a personal touch to the whole process.
This means buying your policy online may take a bit of research on your own part about the types of coverage you really need and how to choose the right add-ons.
| See also: Your Ultimate Guide to Comprehensive Car Insurance |
However, a basic understanding of insurance and the internet helps tremendously if you're considering buying insurance directly online. You'll usually find that you can find all the information you need online. Car insurance companies usually provide 24/7 helplines and online assistance which you can also take advantage of.
Not to mention, wouldn't it feel good to take control and start to truly take the time to understand what you're purchasing?
Choose the policy that fits your needs most
With car insurance liberalisation, a.k.a. detariffication, car insurance providers are allowed to be a lot more flexible with policy prices; therefore, giving you a greater opportunity to lower your premiums.
For example, safer drivers can be rewarded now that insurance companies are using telematics, which tracks your vehicle and updates your insurance provider about the type of driver you are.
Thinking of running that red light? You might want to reconsider unless you want a higher premium. But if you're a safe driver, get ready for some major reductions in how much you pay monthly for car insurance.
While there isn't really a standard or average price for everyone to follow as a guide for car insurance premiums, it's definitely possible to lower the price you're currently paying and opt for an affordable insurance policy which still provides great coverage.
Don't settle for the first car insurance policy that comes along. Know that you have options.