GROW­ING FI­NAN­CIAL LIT­ER­ACY AND IN­COME PER CAPITA FUEL GEN­ERAL IN­SUR­ANCE IN­DUS­TRY IN MALAYSIA, FINDS FROST & SUL­LI­VAN

Insurance - - INDUSTRY UPDATES -

Source: Frost & Sul­li­van press re­lease, 2 June 2014

The in­creased fi­nan­cial lit­er­acy of Malaysians has led to a rise in the de­mand for var­i­ous types of gen­eral in­sur­ance in the coun­try. Cou­pled with this, the grow­ing in­come per capita is open­ing up a host of op­por­tu­ni­ties for gen­eral in­sur­ance providers. New anal­y­sis from Frost & Sul­li­van, Over­view of the Gen­eral In­sur­ance In­dus­try in Malaysia, finds that the in­dus­try earned a gross di­rect pre­mium of RM 15.31 bil­lion in 2013 and es­ti­mates this to reach RM 23.33 bil­lion in 2018 at a com­pound an­nual growth rate of 8.8 per­cent. The study cov­ers ma­rine, avi­a­tion and tran­sit (MAT), fire, med­i­cal and per­sonal ac­ci­dent (PA), and mo­tor in­sur­ance, among oth­ers. "Height­en­ing aware­ness on the ben­e­fits of in­sur­ance and the need for pro­tec­tion aris­ing from con­cerns sur­round­ing es­ca­lat­ing med­i­cal and health­care costs are ex­pected to fuel the med­i­cal and per­sonal ac­ci­dent (PA) in­sur­ance seg­ment," said Frost & Sul­li­van Busi­ness Fi­nan­cial Ser­vices Se­nior Con­sul­tant Tay Soon Ee. "The in­crease in out­bound trav­el­ers and the Hos­pi­tal­iza­tion and Sur­gi­cal Scheme for For­eign Work­ers (SPIKPA) – that man­dates all for­eign work­ers to have med­i­cal in­sur­ance cov­er­age – too is boost­ing the prospects of med­i­cal and PA in­sur­ance providers." The mo­tor in­sur­ance seg­ment will grow steadily over the fore­cast pe­riod due to the ris­ing sales of ve­hi­cles and new mo­tor cover frame­work that al­lows for grad­ual ad­just­ments of the mo­tor tar­iff pre­mium. The seg­ment will see a boost in 2016, in par­tic­u­lar, when the tar­iff for mo­tor in­sur­ance is ex­pected to be re­moved al­to­gether. Fur­ther, the im­prove­ment in trade and busi­ness sen­ti­ments, es­pe­cially with the im­ple­men­ta­tion of the Eco­nomic Trans­for­ma­tion Pro­gram, is likely to spur the growth of the MAT in­sur­ance seg­ment, which is tra­di­tion­ally pos­i­tively cor­re­lated to the growth of Malaysia's econ­omy. Con­sid­er­able de­mand for fire in­sur­ance is also an­tic­i­pated due to the grow­ing prop­erty mar­ket. "Other key trends in­clude the lib­er­al­iza­tion of the gen­eral in­sur­ance in­dus­try as well as the Malaysian Govern­ment's drive to en­cour­age con­sol­i­da­tion, both of which are ex­pected to lead to fewer new play­ers en­ter­ing the mar­ket," noted Tay. "Along with the Malaysian Govern­ment's ini­tia­tives, the need to com­ply with higher cap­i­tal stan­dards dic­tated by the Risk-based Cap­i­tal frame­work is strength­en­ing the in­cen­tive for con­sol­i­da­tion among play­ers in the gen­eral in­sur­ance sec­tor." Ow­ing to the lib­er­al­iza­tion of the in­dus­try, lo­cal in­sur­ance com­pa­nies will con­tinue to be at­trac­tive merger and ac­qui­si­tion tar­gets for for­eign play­ers, es­pe­cially af­ter Bank Ne­gara Malaysia raised the for­eign own­er­ship limit from 49 per­cent to 70 per­cent.

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