Malaysian Insurance Industry Needs More Improvement for Better Growth

March 29, 2018 | Author: | Posted in Insurance

The insurance sector of Malaysia has a long way to go to achieve a 75% penetration rate by 2020. Bank Negara Malaysia (BNM) believes that the insurance industry needs to more improvement to strengthen market participation and encourage better development of the sector. Last year in July, the central bank announced the phased liberalisation of the motor insurance market in an attempt to achieve higher insurance penetration rate.

The phased liberalisation of the insurance market made headlines at the top insurance news portals in Malaysia in July 2017. It has resulted in the improvement of service quality provided by insurance companies and increase in the sale of insurance products. In November 2017, the central bank also appointed Jessica Chew Cheng Lian as new deputy governor for a three-year term. This step has also been taken to bring transformation in the way insurance sector works. However, the overall general insurance market is still lacking behind and need major improvements.

In a recent report, it has been found that Takaful outpaced the conventional insurance sector in Malaysia in terms of growth in the first half of 2017. General takaful’s share in the insurance market grew to 12.8% in the same period. So, what are the pain points that need to be addressed in order to achieve the targeted penetration rate of the insurance sector?

  • BNM believes that insurance operators should leverage new technologies and improve trust among customers to ensure sustainable growth in the industry. They need to focus on talent development so as to improve the quality of their customer service.
  • Analysts have found that insurers are now launching various insurance products after the introduction of phased liberalisation which topped headlines of online insurance news portals in Malaysia in July 2017. However, with more insurance products, insurance companies need to diversify their delivery channels and redesign them to better suit citizen needs, especially for first-time buyers.
  • The phased liberalisation will also enable insurers to make insurance products affordable for all buyers, thereby increasing insurance penetration rates among underserved segments of the population.
  • In a report released by BNM, it has been found that insurers in Malaysia paid no less than RM1.3 billion to foreign affiliates in management fees between 2014 and 2016. That’s why Bank Negara Malaysia notified foreign insurers in June 2017 to increase their local shareholding levels to at least 30 percent. Since presently foreign players dominate Malaysia’s insurance environment, so BNM aims to lift domestic participation by 2018 with this step.
  • Both life insurance sector and motor insurance segment have lost millions of dollars in claim settlement, many of which are fraud claims. That’s why the Malaysian Insurance Institute (MII) launched the Fraud Intelligence System (FIS) in September 2017 to combat fraud particularly in the motor business. This fraud detection system will aid insurers and takaful operators in identifying fraudulent claims. It is expected to be fully rolled out in August 2018. The objective of the use of FIS is to reduce insurance fraud by 30% by 2018.

The insurance industry players must stay ahead of the curve by leveraging digitalisation, making insurance products more affordable, increasing local sharing in insurance business and bringing changes in frameworks to drive growth in the coming years. If aforementioned steps are implemented and followed strictly by insurers, then the insurance sector will definitely achieve its targeted penetration rate of 75% by 2020.

To stay updated about insurance news in Malaysia, visit www.piam.org.my.

Please follow and like us:
0
About Author
Peter works as a senior advisor at a leading car insurance company in Malaysia. He also works as a freelance commercial writer and has interests in topics such as insurance, financial planning and wealth management.

Author:

PIAM Insurance makes the renewal of your motor & car insurance more reliable and offer the best insurance policy online in Malaysia.

This author has published 14 articles so far.

Leave a Reply

Enjoy this blog? Please spread the word :)