Motor Insurance Dominate Non-Life Insurance Industry in Malaysia : Ken Research


Ken Research announced its recent publication on, “Non-Life Insurance in Malaysia, Key Trends and Opportunities to 2020“. Report provides a detailed outlook by product category for the Malaysian non-life insurance segment, and a comparison of the Malaysian insurance industry with its regional counterparts. It provides values for key performance indicators such as written premium, incurred loss, loss ratio, commissions and expenses, combined ratio, total assets, total investment income and retentions during the review period (2011-2015) and forecast period (2015-2020). The report also analyses distribution channels operating in the segment, gives a comprehensive overview The report brings together modelling and analysis expertise, giving insurers access to information on segment dynamics and competitive advantages, and profiles of insurers operating in the country. The report also includes details of insurance regulations, and recent changes in the regulatory structure.

General insurance is typically defined as any insurance that is not determined to be life insurance. General insurance or non-life insurance policies including automobile and homeowners policies. The payment is made proportional to the loss from a particular pecuniary event.  The Malaysian non-life insurance segment expanded during the review period at a review-period CAGR of 6.0%. Notable recent mergers and acquisitions include AIA Group Ltd.’s purchase of ING’s Malaysian insurance business and the acquisition of MUI Continental Insurance Bhd by Tokio Marine Holdings Inc

The Malaysian non life insurance industry is among the fastest emerging markets of the global insurance industry; its stable economic growth and well-developed regulatory framework have drawn the attention of international insurers. With the proposed Financial Services Act 2013 and Islamic Financial Services Act 2013, the implementation of the Internal Capital Adequacy Assessment Process (ICAAP) and the liberalization of the insurance sector, Malaysia provides a competitive operating environment with financial stability and a well-framed regulatory system for the finance and insurance sectors. The small increase in numbers i.e. growth rates reflect more challenging business conditions, especially in the marine, aviation and transit line of business. Malaysia’s central bank, Bank Negara Malaysia (BNM), regulates all insurance entities in the country, including brokers, adjusters and financial advisors. Insurers can only obtain a licence from the Ministry of Finance on the recommendation of BNM, while brokers and financial advisors must be approved by BNM and adjusters are required to register with the bank.

The major lines of business in the general or non-life insurance sector for both conventional and Takaful insurance remain motor, fire, and personal accident and medicalThe composition of general insurers’ funds has remained stable over the past five years, with the majority of assets held in debt securities. In 2012, private debt securities and Malaysian government securities accounted for 25% and 20% of general insurers’ funds respectively. The remainder are cash and deposits (25%); other investments and assets (20%); amounts due to clients (7%); property, plant and equipment (2%); and loans, investment properties and foreign assets (1%). According to BNM data, this segment is concentrated, with the 10 leading companies accounting for 72.5% of the segment’s gross written premium in 2015. Leading companies include: Allianz General, Berjaya Sompo Insurance, Etiqa Insurance, Lonpac Insurance, MAA Assurance, MSIG Malaysia, Tokio Marine Insurance (Malaysia) and Uni. Asia General Insurance.

The BNM has announced plans to restructure motor and fire insurance business through detariffication. The act of removing the pricing regulations of an industry, set forth by tariffs created by a regulatory body. Detariffing allows an industry to price its goods or services at market value, as regulation is discontinued to promote market equilibrium. In Malaysia, fire and motor insurance premium rates are currently tariff-controlled, but the underwriting performance of these two lines of business in recent years diverged. Malaysia has not been impacted by any major natural catastrophes in recent years. Malaysian general insurance industry strictly follows fire tariffs, except that some flexibility is allowed for larger risks. Fire business’ underwriting performance has been favourable. Fire tariffs in Malaysia have been adequate and provided general insurers with good profits in recent years. Motor tariffs in Malaysia had not been changed for many years until 2012, which addressed insurance buyers’ affordability concerns on one hand, but resulted in poor underwriting performance in this segment. Gradual revision of motor tariffs began in January 2012 and will be implemented incrementally in the years to come. However, motor business remains unprofitable for many Malaysian general insurers, and the underwriting losses from motor business must be cross subsidized from underwriting profits made in other lines. Malaysia’s general insurance market expects fire and motor tariffs to be abolished in 2016, which have introduce increasing competition in the fire segment and help addressing the unsatisfactory underwriting performance of the motor segment. Abolition of tariffs has benefited insurance buyers, the insurance industry and society in the end.

Motor insurance was the largest non-life category, more than fifty percent of the segment’s direct written premium in 2015. Agencies remained the dominant distribution channel in the Malaysian non-life segment during the review period. Motor insurance remains the dominant line of non-life business in Malaysia, with major market share. Although the overall industry’s net claims incurred ratio (NCIR) remained steady throughout 2015, falling in few decimal points, total claims incurred within the motor segment remained exceedingly high. Insurers have benefited from falling vehicle thefts, which dropped however, Malaysia’s high rates of road accidents and fatalities remain a major cause for concern. In 2015 third party, bodily injury claims rose. In the fire segment, meanwhile, growth jumped up, making fire the second-largest non-life segment. The NCIR for fire stayed stable in 2015. Developments in motor vehicle insurance are a grave matter, because the sub-sector accounts for nearly half of all non-life premiums. Health and personal accident insurance should sustain double-digit growth, thanks in part to new users of the latter and in part due to health expense inflation. Property insurance may face economic headwinds. Transport insurance premiums should benefit from the growth in regional trade.

Insurers are increasingly focusing on digitalisation to enhance their customer services platforms.  Increasing price competition and providing more freedom to insurance companies to set the right price for the insurance risks they assume, can encourage innovation and make insurance products more affordable. This will benefit insurance buyers, but insurance companies need to be prudent in managing their insurance claims costs and expenses at the same time. Claims cost management initiatives also benefit insurance buyers by encouraging better risk awareness from the insurance buyer’s perspective – for example, promoting road safety to reduce frequency and severity of traffic accidents in the motor segment, or taking fire prevention measures for property risks. Further, price competition provides insurers with incentives to forecast insurance costs accurately, refine risk classification systems and underwrite carefully to avoid adverse selection. Promoting adequate rates is a key factor in ensuring insurers’ solvency and sustainable growth of the insurance industry in the long run, According to ken Research Analyst.

Topics Covered in The Report

  • Non-life insurance industry Malaysia
  • Global life insurance industry research
  • Life insurance businesses Malaysia
  • Insurance sector worldwide
  • Malaysia non- life insurance market research
  • Non-Life insurance sector trends Malaysia
  • Malaysia General insurance regulations
  • Motor insurance market research Malaysia
  • Property insurance sector Malaysia
  • Health insurance demand Malaysia
  • Malaysia automobile insurance industry research
  • Malaysia four wheeler insurance demand
  • Malaysia General Insurance Industry

For more coverage click on the link below:

Related links:

Targeting UK Mass Affluents with Insurance

UK Personal Lines Insurance: Distribution and Marketing 2016

Ken Research
Ankur Gupta, Head Marketing & Communications



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