Not Enough Life

Malaysian are grossly under-insured. And those who have insurance aren’t adequately covered.
But offering policies with higher sums assured won’t work because life insurance is not a priority for most Malaysians.

The younger generation especially would rather spend their money on smart phones and luxury goods – which actually are way pricier than insurance payments. A life policy can cost as little as RM100 a month. No one has ever gone bankrupt because they bought insurance. So not having enough money is a poor excuse.

Among those who have insurance, the protection gap keeps widening because they’re reluctant to review their policies. They think agents just want to make a sale. But the reality is that with rising healthcare costs and changes in your dependants’ needs, more protection is a must.

The “2013 Protection Gap in Malaysia” [study by Life Insurance Association of Malaysia (Liam)] indicated that four to five of every 10 Malaysians don’t have life insurance. And those who do have some don’t have sufficient coverage for their loved ones.

When you buy a life insurance policy, the rule of thumb is to insure a sum equivalent to 5 to 10 times your annual salary. With Malaysia’s gross income per capita of RM32,000, the current average sum assured of RM50,000 is far below the ideal amount one should be insured for. This means that Malaysians are generally unprepared for rainy days. Imagine if something unfortunate were to happen to the family’s breadwinner and they’re only left with a RM50,000 life insurance policy. Today, RM50,000 will not get the family very far. They may have difficulties sustaining their current standard of living.

There’s a growing demand for insurance products with savings and investment elements but the level of awareness among Malaysians about protection is low. Our ­premium contribution is only 3.1% of the GDP in 2014 – much lower than Taiwan (15.6%), Hong Kong (12.7%), Japan (8.4%), and Singapore (5%), according to Bank Negara.

Currently, most consumers buy life insurance or family takaful products through an intermediary like an agent. But there are those who are financially literate and savvy enough not to need financial advice or product recommendation. Online products will then appeal to them with straight-forward, easy to understand, and solely for protection products.

Like online banking, an online account will be introduced by all insurers and takaful operators for policy owners and takaful participants to obtain information on the status of their policies and certificates, and get real-time updates and downloadable transaction forms easily.

With the Framework, insurers and operators will have greater flexibility to manage their expenses. This encourages product innovation and is beneficial to consumers. The industry, however, must continue to safeguard con­sumer interests in this more liberalised environment, according to the Bank’s statement. For example, in the case of investment-linked products, they must ensure a proportion of premium contribution is allocated to the unit funds, before deduction of charges.

Unlike in other countries where consu­mers ask: ‘How much will the family get when I die?’, Malaysians want to know how much they will get back from the policy before they die.