You’d think that with our country’s unpredictable weather and frequent flooding, Malaysian motorists would insist on flood cover for auto insurance. But the opposite is true, which is shocking. According to insurance company AXA, during one of the big flood events last year, only 18% of vehicles it towed away had flood cover. That means over 80% of AXA’s customers did not opt for flood and special perils coverage.
And it’s no anomaly. According to General Insurance Association of Malaysia (PIAM), the umbrella body for insurance companies, only 4% of Malaysians nationwide have purchased flood insurance coverage.
Malaysia is blessed when it comes to natural disasters. We’re just inside of the “Ring of Fire” that includes Indonesia’s Sumatra, which means there are no volcanos to deal with, and we don’t get earthquakes too. Forest fires, the kind that’s a regular occurrence in Australia and California, are also alien to us.
That leaves just flood. With its equatorial climate and presence of two monsoon seasons, Malaysia gets plenty of rain and floods have become worse in recent years due to the fallout from global climate change, as evident in the unprecedented flood disaster that hit both urban and rural areas early this year. It’s getting worse in KL these days due to the amount of construction going on.
With the coming monsoon season and rainfall, flood risk is imminent, and many Malaysians are still uninsured against flood. Despite a slight increase of take-up rate following recent floods (3.9% of AXA motor insurance policyholders have added on flood cover this year, the company says), many are “still grossly under-insured” and have low awareness towards the importance of flood insurance.
“In truth, people only realise the importance of insurance protection after a significant incident, when they have no compensation or means of replacing their damage and losses. Such mindset should change as insurance is not about prediction or investment, but a precautionary measure to protect against unforeseeable risks and ensure greater financial protection and peace of mind,” said Emmanuel Nivet, CEO of AXA.
AXA’s boss may be an interested party, but he’s right – insurance coverage is one of those things that when you realise you need it, it’s too late, if you don’t already have it. Many renew insurance not for the financial protection, but just so that they can renew road tax, forgoing all options for the lowest possible sum. This is fine, until something happens.
With floods happening so frequently these days, you truly never know. And it’s no longer confined to certain flood-prone areas like in the past as well. Flood is an optional cover under most comprehensive motor policies, so make sure you tick the Special Perils cover the next time you renew your car’s insurance yourself, or instruct your agent to include the cover. Special Perils cover insures against not only flood, but also storms, landslides, or other acts of God.
Is it expensive to do so? We recently tabled the costs of adding on Special Perils coverage from auto insurance companies in Malaysia and found that the rates are between 0.15% to 0.50% of the sum insured.
For example, if you’re insuring a car for RM50,000, you’re paying as little as RM75 with MPI Generali, while other insurance providers like Allianz, AXA, MSIG and Tokio Marine offer the coverage for RM100. With higher rates like those provided by AIA, AIG, Etiqa, Kurnia, RHB and Takaful, the payable amount is between RM125 to RM250. Check out the table above.