STRONGER GROWTH IN INSURANCE SECTOR SEEN
Source: The Star, 21 August 2012
The recent legal suit brought by Silver Bird Group Bhd against its auditors may bring professional indemnity insurance into play. Industry players see this class of insurance gaining stronger growth and prominence in the next few years. This is due to greater awareness among consumers and companies that they have the legal right to sue for professional negligence and the rising number of professionals in the country. Professional indemnity insurance covers professionals for claims made against them by their clients for losses incurred from negligence or breach of duty of care. According to Allianz General Insurance Company (M) Bhd CEO, Zakri Khir, the demand for professional indemnity insurance has surged as more professionals realise the importance of this insurance cover and others buying it to meet requirements by professional bodies or contractual obligations imposed by the principal. While the demand for professional indemnity insurance was expected to increase, Zakri does not see premiums going up in tandem with this increase partly due to competition among the insurance companies to increase market share. He pointed out that consumers were also more price-sensitive towards the insurance cost rather than their product provider. According to ACE Jerneh Insurance Bhd country president, Steve Crouch, the extension of the tax deduction for professional indemnity insurance premium expense to all professionals, there is expectations to see an uptick in demand for this type of insurance, especially as the small and medium enterprise industry grows and more professionals
venture into private practice. In 2009, the tax deduction for this insurance premium expense was extended to all professionals who undertook the business of their profession; regardless of whether the purchase of a professional indemnity insurance policy was a requirement under the profession's by-laws or statute.
In Malaysia, Crouch observed that this type of insurance was not as prevalent compared with developed and litigious countries like the United States, Australia and Europe. As the Malaysian market becomes more affluent and sophisticated, professional indemnity insurance would become an important part of risk management, especially for the service industry, to protect their business interests against legal claims for business owners and their employees.
ACE Jerneh Insurance Bhd does not envisage a rise in premium rates resulting from an increased in demand, noting that premiums for professional indemnity insurance were largely based on coverage required and varied by industry.
Zakri Khir, CEO, Allianz General Insurance Company