RM300 Million Unclaimed Money

The insurance and takaful industry has more than RM300 million worth of unclaimed benefits as a result of outdated records of policy and certificate holders, says Bank Negara Malaysia (BNM). 

To improve the efficiency in the claiming process and to reduce the incidence of unclaimed death benefits among Malaysians, the central bank said it was finalising arrangements with the National Registration Department (JPN).

The arrangements would facilitate periodic checks by insurers and takaful operators against the death registry.

“This will enable insurers and takaful operators to pro-actively contact and pay the benefits to the rightful beneficiaries, and the arrangement is expected to be operational in 2019,” BNM said in its Financial Stability and Payment Systems Report 2018. 

According to the report, total premiums and contributions from Malaysian insurance and takaful sector rose 4.9 per cent to RM66.6 billion in 2018, an increase from RM63.5 billion in 2017.

Meanwhile, the penetration rate of life insurance and family takaful, measured as the percentage of Malaysians who own at least one individual or group life insurance policy or family takaful certificate, stood at 41 per cent in 2018.

“Insurance/takaful coverage also remains uneven with the vast majority of Malaysians, mainly in the lower income segments, without insurance/takaful protection,” it said.

On the Perlindungan Tenang initiative launched in November 2017, the BNM said over 29,500 policies and certificates have been sold, comprising 28,900 life policies and family takaful certificates and over 600 fire or flood policies and certificates.

BNM also said a study on the key drivers of medical claims inflation and potential cost containment measures would be published by the third quarter of 2019 to provide evidence-based analysis to inform future initiatives.

Last year, a medical cost containment task force was established by the industry as part of the efforts to control medical claims inflation, which has pushed the cost of medical and health insurance/takaful higher in recent years. 

On the direct distribution channels of life and takaful products introduced in June 2017, BNM said products offered through it such as the Internet, would be expanded to include pure protection critical illnesses and medical and health insurance/takaful products beginning from March 2019.

Meanwhile, it also said the limits on commissions and agency-related expenses for investment-linked products would be liberalised.

This is in tandem with the implementation of the Minimum Allocation Rate (MAR) for investment-linked insurance and family takaful products starting in July 2019 and July 2020, respectively. 

On the general insurance segment, the report said following the liberalisation of motor and fire insurance tariffs on July 1, 2016, for the first phase followed by the second phase on July 1, 2017, about 34 per cent of policies and certificates experienced lower rates than the tariff.

It also said 10 per cent of policies and certificates saw rates unchanged, and 56 per cent of policies and certificates saw rates increase compared to the tariff in 2018.

“In the higher-risk vehicle segments, particularly theft-prone vehicles, premium and contribution rates increased by up to 30 per cent, while in other vehicle segments with better claims experience, rate decreases by up to 60 per cent from the tariff rates were observed,” it said. 

Moving forward, the central bank expected the adoption of technologies, such as the use of telematics or usage-based products would gain more traction in the insurance industry which would facilitate further refinements to pricing based on individual risk profiles.

BNM also said it was currently developing proposals for the next phase of liberalisation of motor and fire insurance tariffs, which would consider appropriate and gradual adjustments of premiums and contributions for compulsory ‘Third Party’ motor and fire products, including their timing.