The Use of Telematics in Malaysia

It is refreshing to see the product development and innovation in the general insurance / takaful industry in Malaysia since the liberalisation of the Motor and Fire Tariff starting with Phase 1 on 1 July 2016.

It is expected that the demand for telematics will come from those from high-risk groups of the insured (with high premiums), e.g., the younger drivers. Telematics for Motor insurance can even influence the drivers’ behavior with the end objective of ensuring a safer driving condition to the benefit of all road users as well as the insurers (from lesser claims).

But just how much of a discount on premium can consumers expect from such usage of telematics? Is the amount significant enough to entice the consumers to share their driving data with the insurers given the potential privacy issue?

On an individual basis, for this to take off, the benefits (discount) would need to outweigh the hassle/cost. However, on a commercial basis, the benefits of telematics have been widely known in fleet management. It is well- positioned as a risk management and monitoring tool which enable the transportation and logistics companies to keep track of their drivers/employees.

Take Uber for example. On the same app that is used to pick up passengers, it also tracks the drivers’ speed, and whether they accelerate too quickly or brake too hard. As cited from Uber officials, the company saw a 5% reduction in passenger complaints about driving and an 8.5% reduction in drivers speeding over 80 mph since its implementation in USA in 2016.

So perhaps for this to take off on the individual level is not so much from the discount, but more from the perspective of risk management and monitoring tools for the parents to monitor their children’s whereabouts and driving behavior, by allowing parents access to the telematics data of their children.

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