Risk-based motor insurance pricing considered: PIAM

Motor vehicle insurance in Malaysia could be priced with greater dependence on a driver’s safety, aimed at reducing road crashes and rewarding responsible motorists, reported The Star. The proposed risk-based pricing model for motor insurance aims to reward safer drivers lower premiums, the report wrote.

“Currently, there is a degree of cross-subsidisation where lower-­risk motorists are offsetting the higher claim cost of others. We are working closely with Bank Negara Malaysia and related government agencies to see how we can further improve road safety and behaviour,” said the General Insurance Association of Malaysia (PIAM) chairman Ng Kok Kheng.

In comparison with the current motor insurance framework that rewards drivers based on their no-claims discount (NCD) claims history, the risk-based pricing model incorporates a wider range of factors, including driving behaviour, accident frequency, traffic offences, vehicle usage patterns and other relevant underwriting indicators in order to more accurately reflect an individual’s risk exposure, according to the report.

Risk-based pricing is already standard for most insurance products, such as medical insurance, said Ng. “Pricing depends on the cost incurred through claims, which are then translated into the premiums paid. While motor insurance remains a regulated industry, any enhancements to the framework implemented must remain fair, transparent and appropriate for consumers. The end goal is to reduce the number of road accidents and road fatality rates,” Ng said.

A major pillar of the initiative is to build supporting infrastructure with industry, ideally requiring reliable, timely data from relevant enforcement and regulatory agencies to establish a comprehensive, integrated claims and risk database, Ng said.

“This allows better predictive modelling, allows early identification of high‑risk driving patterns, supports incentivising good driving behaviour and identifies interventions required for risky driving behaviour in alignment with the public road safety agenda,” he continued.

It is also important to help motorists understand how their risk profile affects their premiums over time, which can include behaviour and claims history, Ng said. “It’s not an easy task to manage, and we also have to see if the industry is ready. Currently, there is a partial risk-based pricing system for motor insurance, operating within a set range to maintain stability,” he said.

“Beyond rewarding responsible drivers, the industry hopes this framework encourages a collective focus on road safety and improved driving behaviour. It establishes positive reinforcement for good driving behaviour that not only promotes compliance with traffic law but ultimately makes the roads safer for all,” said the PIAM chairman.

The motor insurance segment of the general insurance industry posted losses of RM289.3 million in 2025, where a combined ratio of 103% reflected that claims payout exceeded premiums collected, and the average cost per claim increased by about 20% to RM8,831 in 2025, according to PIAM.

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