Common Criteria that Companies Use to Calculate Your Car Insurance Premium

January 20, 2018 | Author: | Posted in Insurance

In Malaysia, all drivers are required to carry motor insurance that covers costs related to an accident, theft or damages. When a claim is made by the driver in the event of an accident, damage or theft, the insurance company needs to provide a payout that may include repair or replacement of the vehicle or medical care related to injuries. Auto insurance companies base their premium rates on how likely you are to file a claim. They perform insurance risk assessment to calculate risk and determine premium rates. Know the common risk assessment factors used by insurers so that you can shop smartly for your car insurance.

Car-Related Factors

The car you bought and going to drive on the roads will significantly affect your rate. Insurers carry a list of cars with safety ratings. Owning a vehicle with a high safety rating can lower your premiums. The safety rating is based on factors, such as the likelihood of your car getting into an accident or being stolen. Safety features such as automatic seat belts, airbags and traction control also make your car safer.

As a rule of thumb, larger cars are safer than smaller cars in the event of an accident. Most larger cars with good safety ratings have lower premiums. However, this does not always hold true. Obviously, insurance for a sports car is more than a smaller, slower, more standard car.

Some cars are also more likely to be stolen than others. A car model that is listed in the top 10 most stolen list in Malaysia will cost higher to insure. Some of the most stolen cars in Malaysia include the Toyota Hilux, Proton Perdana, Mitsubishi Pajero, Peugeot 508 and more.

Your car’s age is also going to affect your risk rating as a driver. The cost of repairs needed for an older car is higher than the vehicle’s current market value. It might be more prudent for a car owner to discard the vehicle after an accident, rather than paying for the damage repairs.

Personal Driving Habits

After detariffication of the motor insurance market in July 2017, personal driving habits have become an important factor in the insurance risk assessment process. Your past driving behavior is indicative of your future driving behavior. Therefore, your driving history is used in calculating your risk as a driver. So if you were involved in any accidents in the past, you will be considered a “high-risk driver” by insurance companies. High-risk drivers are subject to higher premium rates because you are more likely to file a claim. If you were involved in traffic violence such as driving under influence, then you can expect to see a rise in your insurance costs.

Demographic Factors

If you are a young man under the age of 25 years, then you can expect to pay higher premium than your female counterpart. Getting married can significantly lower your rate. If you are living in a city which is densely populated, then insurers can charge you higher premium as you are more likely to be involved in an accident.

Apart from these criteria, there are several other factors that are used by Malaysian insurers to calculate your risk as insurance holder. It is impossible to know all those factors used by the motor insurance companies for insurance risk assessment, and what your premium will be. Always compare insurance policies online to make the right decision.

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About Author
Robinson Jame is a senior insurance advisor at a leading insurance company in Malaysia. He is also a freelance commercial writer and has interests in topics such as motor insurance industry, financial planning and wealth management.


PIAM Insurance makes the renewal of your motor & car insurance more reliable and offer the best insurance policy online in Malaysia.

This author has published 14 articles so far.

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