According to statistics from the Life Insurance Association of Malaysia (LIAM), claims paid in 2013 amounted to RM6.9 billion in various types of claims including death, disability, medical and cash bonuses, 3.7 per cent higher than the corresponding amount of RM6.7 billion a year earlier.
In addition, RM8.6 billion was paid in maturity amount and cash surrender values in 2013, 14.2 per cent higher than the corresponding figure of RM7.5 billion in 2012. The increase was mainly due to fluctuation in maturity payment which was dependent on the term of the policies.
“The life insurance industry in Malaysia remained stable with a small negative growth of 0.2 per cent in 2013, as measured by new business total premium (single premium plus annualised premium).
“The new business total premium in 2013 was RM8.19 billion, as compared to RM8.20 billion in 2012,” LIAM’s Vincent Kwo highlighted.
“Proactive measures should be taken by the insurers and the policy makers to increase insurance awareness and to encourage insurance purchase among the Malaysian population to reduce protection gap.
‘The result of our study are expected to spur the insurance industry to move forward in achieving the targeted penetration rate of 75 per cent by 2020 under the Economic Transformation Plan.”
As the government looks to enhance products by introducing regulatory measures such as the Financial Services Act 2013 and the Islamic Financial Services Act 2013 – both of which come into
force this year – the times are definitely interesting for insurers.
The General Insurance Association of Malaysia (PIAM) believes market conditions will evolve to reflect broader-based competition and a principle-based regulatory regime which modernises the laws that govern the conduct and supervision of financial institutions.
“With the development of a comprehensive regulatory and supervisory framework for the insurance industry and a more competitive insurance market, another important structural adjustment that the regulator is looking at is the review of the existing costs controls that are applied to life and general insurers,” noted PIAM.
Its chairman Chua Seck Guan said: “It is important for insurers to challenge their mind set, consider the outlook for the global economy and make a commitment to develop further as the industry plays a robust role in Malaysia’s financial system, offering a wide spectrum of general and life insurance products to cater to a more knowledgeable and financially aware society.”
The industry is directing its efforts to ensuring a firm foundation for orderly transition into this new and challenging environment.
Towards this end, Malaysian laws will place insurance companies on a platform readied by Bank Negara Malaysia for advancing forward as sound, responsible and responsive insurance companies.
Plenty of room for growth
Ernst & Young Malaysia partner (assurance) Brandon Bruce Sta Maria noted that life insurance had room for continued growth as the penetration rates for life insurance was lower compared to more matured markets such as Singapore and South Korea.
He expected the industry to maintain at least an equal growth rate compared to last year.
For the general insurance industry, Sta Maria expected premiums to continue to exceed prior year’s expectations due primarily to increased economic activity and growth.
This, he said, would be further enhanced by the expected increase in new motor premiums and the effects of the gradual increase in motor tariff premiums.
The priorities are for the industry to be more competitive, explained PIAM, make significant changes to raise performance standards in tandem with global advances and keep pace with the established international best practices on underwriting performance, improving claims costs ratios, enhancing productivity and reducing distribution costs.
“With liberalisation coming in the next few years, operating beyond the limits of what is currently practiced with a diversified delivery/distribution channel and strong market conduct practices is paramount,” PIAM enthused.
The industry will also have to deliver a more positive customer experience and should not compromise on the level of customer standards.
Further, with the global challenges stepping in, the requirement of a more skilled professional workforce to support the demand for complex products and sophisticated customer demands will be important.
The insurance industry will have to change its approach on attracting talent as only by attracting the right talent will the industry be able to prosper.
Under-insured still an issue
On the notion of Malaysians being under insured, Kwo of LIAM highlighted that it is crucial to note the degree of under-insurance as the sudden loss of a main wage earner could potentially have a damaging ‘domino effect’ with dire financial consequences.
“lt may result in the inability to pay off the mortgage, debts or children,s education,” he said, adding that the size of the protection gap is often a true reflection of the potential demand for life insurance coverage.
The findings also showed that families whose primary wage earner was not covered by either life insurance or medical insurance have the largest protection gap, hence buying life insurance would solve the problem.
Kwo said proactive measures should be taken by the insurers and the policymakers to increase insurance awareness and to encourage insurance purchase among the Malaysian population to reduce protection gap.
Traditional policies continued to be slightly more preferred by consumers than investment-linked business. The question now remains if the insurance players themselves share similar sentiments with the associations.
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