Detariffication Malaysian Insrance

The ongoing phased detariffication of the Malaysian insurance industry is not expected to lead to another wave of consolidation. However, the general trend is expected to continue, potentially driven by a combination of regulation and market opportunity for larger companies to expand their footprint.

Speaking to the media on the sidelines of the launch of the Malaysian Insurance Highlights 2019 report, Malaysian Reinsurance Bhd (Malaysian Re) president and CEO Zainudin Ishak (pix) said that currently, the Malaysian market is considered stable.

“Across the players in Asean, Malaysia is ranked second after Singapore in the average size of general insurance companies with a value of US$161 million (RM672 million), so with the 21 insurance companies currently operating along with the four takaful providers, this is sufficient for the present moment.

“However, this dynamics might change for a variety of reasons. There’s no ideal number of companies to have in the market, but if you look at the critical mass, each and every company has to put up capital by the shareholders and that will have to generate returns.

“At US$161 million per insurance company, that is already above critical mass levels,” he said.

Apart from market consolidation, the report also highlighted other major trends impacting the industry, namely: detariffication, B40 strategies, takaful prospects and InsurTech.

On detariffication, the report stated that of the interviewees polled, 52% expect average motor insurance rates to be below pre-tariffication levels, while 83% expect the same to occur for fire insurance prices.

However, this is subject to significant uncertainty over Bank Negara Malaysia’s future pace of liberalisation.

Meanwhile, Dr Schanz, Alms & Co AG partner Henner Alms said the current mySalam programme may not be sufficient to meet and address the demands of those who need it.

Alms said the current programme covers 36 critical illnesses, but the challenges that the B40 segment faces could be far wider than these.

“The question is how do you get beyond the current solutions that are provided? There have been different approaches taken across emerging markets, but it is agreed that the under penetration in low-income segments is a major challenge for every society.

“These are people that are most exposed to disasters and have the least amount of protection, and therefore it is in the interest of every policymaker and insurance provider to find a solution to address this kind of challenge,” he said.

According to the report, when asked about potential alternatives to the current B40 scheme, survey participants came up with suggestions such as subsidised compulsory insurance schemes, technology-enabled solutions and capital relief and tax incentives for those insurers that are actively serving the B40 segment.

Other suggestions also include public-private partnerships between insurers and government agencies, dedicated public-private awareness programmes and innovative ways of premium payments.

Finally the report looked at the long-term effect of digitisation on the industry, and the findings showed that 84% of the interviewees said they consider platform-based ecosystems irrelevant.

“Most experts and executives think that such ecosystems ‘will rise but slowly’. Consumers are not seen as being ready yet for such digital solutions.

“In addition, even the longer-term potential of digital insurance ecosystems is expected to be limited to the segment of low and easily affordable premiums,” it noted.

The inaugural MIH is the latest in a series of thought leadership publications from Malaysian Re, and offers a comprehensive review of the current opportunities and challenges facing Malaysia’s general and takaful markets.