Life Insurance Synergistic Partnerships

There is significant untapped potential for the insurance industry in Malaysia to increase its broader economic impact and contribute to the country's growth, says Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus.

In her speech at the Malaysian Insurance Institute (MII) summit, Nor Shamsiah noted that insurance in Malaysia accounts for only 1.7% of gross domestic product and 5.8% of financial assets.

"Over the past few years, penetration (in terms of total premiums to GDP) for the industry remained low at 4.8%. Less than 40% of Malaysian citizens own a life insurance or family takaful policy. For the working population aged between 20 and 59 years old, this is higher at about 50%," she said.

She added that given the demands on the industry there should be a long-term view on investments in capacity and a focus on quality standards and operational efficiency. 

"It is therefore timely, if not more urgent, for institutions to consider synergistic partnerships to achieve the scale and competitive edge to lift performance and break into new markets."

Illustrating these demands, she said the industry has a responsibility towards helping to contain costs in the Malaysian medical and health insurance market, and ensuring the life, health and pension needs of an ageing population are met in a sustainable manner.

"In fact, the Malaysian medical and health insurance market has the highest average gross medical inflation. It was around 15.4% in 2018. It is expected to continue rising," she said.

Nor Shamsiah also said it is important for insurance companies to address the user experience via technological innovation. 

"For example, quality engagements with first-time buyers and the underserved will go a long way in closing the huge protection gap which remains our most important priority right now."

To facilitate innovation, she said BNM aims to lower barriers to innovation and competition via a regulatory sandbox to test new innovations, taking a proportionate approach to reduce compliance costs for the introduction of innovative solutions where risks to consumers are low, and developing a more coherent approach for ensuring legal and regulatory compatibility with new innovations.