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Kuala Lumpur, 27 Aug 2019 – The General Insurance Industry recorded a drop of 1.4% with gross direct premiums of RM 8.92 billion for the first six months of 2019 compared to the same period last year. Motor insurance the dominant class was relatively flat with a marginal decline of 0.2% at RM 4.18 billion. Fire insurance grew 2.5% to RM 1.73 billion.
The industry is confronted with twin challenges; low penetration rate and escalating claims. The general insurance penetration rate in Malaysia (total premiums as a percentage of GDP) is low tracking at 1.23% for 2018 compared to the global average of 3%. Rising claims particularly for Medical and Health (MHI) as well as Motor posed major concerns to insurers. Medical inflation has been on an upward trend with double digit increase in recent years and is projected to reach 14% in 2019. The insurance industry has set up a joint task force to study the cost drivers in medical inflation and will submit recommendations to the authorities to contain medical costs for the benefit of all stakeholders and the insuring public.
On motor claims insurers paid out a staggering RM 14.9 million per day in property damage, bodily injury and vehicle theft. Although road fatalities decreased 6.7% from 6,740 in 2017 to 6,284 in 2018, the number of road accidents continued to go up. Based on statistics published by the Ministry of Transport, a total of 548,598 accidents were recorded in 2018 (2017: 533,875 accidents; 2016: 521,466 accidents and 2015: 489,606 accidents). The number of accidents went up by 12% over a 3-year period from 2015.
PIAM Chairman, Antony Lee said, “PIAM will adopt a targeted and focused approach in an industry-wide effort to inculcate safe driving behaviour and reduce road accidents. The plan is to implement this at state level by zooming into the high accident-prone areas and collaborating with relevant authorities and enforcement agencies. States which achieved significant reductions in both accidents and fatalities will be incentivized in a road safety campaign which PIAM is planning to launch in the coming months. The industry looks forward to further liberalisation of the motor tariff which will allow premiums to be priced according to the risk profile of motorists.”
The general insurance industry provides emergency assistance and peace of mind to road users through the Accident Assist Call Centre (AACC). Launched in 2013 the AACC dedicated toll-free hotline 15-500 operates 24/7 nationwide offering immediate roadside assistance to the general public – whether resulting from a road accident or a breakdown. AACC is able to help check insurance coverage and to connect with road user’s own insurer.
The industry has launched more new insurance products to provide better protection and serve the evolving needs of consumers. As at 25 August 2019 there were 66 new Motor and 50 new Fire products in the market. CEO Mark Lim highlighted, “The ongoing phased liberalisation of the tariff has generally benefited consumers across all segments. Apart from the innovative products being offered for consumers’ selection, insurance premiums have been on a downward trend with healthy competition in the market place. Average insurance premium per motor policy decreased from RM611 in 2015 to RM584 in 2018. The number of consumer disputes has also reduced by almost 50% (291 motor cases in 2017 to 150 in 2018) according to latest data issued by the Ombudsman for Financial Services which is the independent alternative dispute resolution channel reflecting better customer engagement and complaints management by motor insurers.
This is borne out by the high-level findings of a Nielsen research study commissioned by PIAM in May last year to gauge customer satisfaction on general insurance. The 2018 results showed that the customer satisfaction index for General Insurance in Malaysia was 78%. This was higher than mature markets such as US (77%) and Singapore (72%). Chairman Lee noted that “This is certainly encouraging news for insurers and will spur the industry to work doubly hard to enhance claims settlement processes further and provide quality customer experience as the market prepares to embrace full liberalisation in the coming year.”
Vehicle theft counts continued to decline for the sixth consecutive year. The total number of stolen vehicles went down by 26% from 7,027 to 5,173 vehicles for all classes during the first half of 2019. PIAM and the Vehicle Theft Reduction Council of Malaysia commend the unrelenting efforts, commitment and hard work of the Police (PDRM), Customs and other law-enforcement agencies to combat vehicle theft in the country.
Otherwise, the industry was weighed down by weak performances in both Medical and Health Insurance (MHI) as well as the Miscellaneous class comprising Bonds, Liabilities, Engineering and Workmen’s Compensation.
MHI declined 14.8% to RM 0.57 billion while Miscellaneous shrunk 9.8% to RM 1.04 billion impacted by two factors; a 27.2% drop in Contractor’s All Risk and Engineering insurance resulting from certain large constructions projects being downsized or put on hold and a 58% decline in Workmen’s Compensation and Employers’ Liability insurance with the transfer of the Foreign Workers Compensation Scheme to the Social Security Organisation (SOCSO).
Marine Aviation and Transit insurance rose 9.0% to RM 0.80 billion boosted by the recovery of the oil and gas sector as well as a 15.3% surge in Marine Hull insurance. Personal Accident insurance declined 1.6% to RM 0.60 billion.
Looking ahead the business outlook will continue to be challenging given the uncertainties in the external environment with the ongoing trade tensions between US and China. PIAM expects recovery in the next six months to be slow and the industry is likely to stagnate for full year 2019.
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