Impact De-Tarrification in Modeling Motor Insurance Premium in Malaysia
Noraini Manan1, Nurhasniza Idham Abu Hasan2, Nurhasnira Abu Hasan3, Nur Faezah Jamal4, Nur Diyana Atiqah Binti Md Rahidin5
1Noraini Manan, Center for Actuarial Sciences Studies, Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia.
2Nurhasniza Idham Abu Hasan, Department of Business Analytics, Sunway University Business School, Sunway University, No. 5, Jalan Universiti, 47500 Bandar Sunway, Selangor, Malaysia.
3Nurhasnira Abu Hasan, Research Information Services Unit, The New Straits Times Press (M) Berhad, Balai Berita Bangsar, 31 Jalan Riong, 59100 Kuala Lumpur, Malaysia.
4Nur Faezah Jamal, Department of Statistics, Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA, Perak Branch, Tapah Campus, 35400 Tapah Road, Perak, Malaysia.
5Nur Diyana Atiqah Binti Md Rahidin, Center for Actuarial Sciences Studies, Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA, 40450 Shah Alam, Selangor, Malaysia.
Manuscript received on 04 August 2019. | Revised Manuscript received on 11 August 2019. | Manuscript published on 30 September 2019. | PP: 7394-7400 | Volume-8 Issue-3 September 2019 | Retrieval Number: C6148098319/2019©BEIESP | DOI: 10.35940/ijrte.C6148.098319
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: De-tariffication has become a hot topic for Malaysian motor insurers after effectively implemented on 1 July 2017. Generally, the insurance companies need to set a rating factor for their premium before calculating the price on selected premium. Typically, these rating factors are based on the risk profile of the policyholder. That means, the price of the premium determined by the risk factors from the profile of the policyholder. The aim of this research to investigate the impact after de-tariff implemented among the motor insurance industry. This research also investigates the effect of de-tariff on the Good Service Tax (GST) in the premium calculation. Multiple Linear Regression (MLR) was used to determine the most significant rating factor that influence the calculation of the premium received by the motor insurance industry. Once these k rating factors and parameters are identified, the value of premiums can be calculated by taking into account these rating factors and parameters in the de-tariff formula and comparing with the existing model. The result of the study indicates that de-tariff model has lower premium compared to Malaysia tariff model. Furthermore, GST is also found to have a significant impact on the motor insurance premium, where policyholders are required to pay higher premiums than non-GST premiums. The results will help the insurance companies to find new formulas in considering new rating factors and improve the accuracy of premium calculations.
Index Terms: De-Tariff, Insurance, Malaysian, Motor, Premium.
Scope of the Article: Bio-Science and Bio-Technology