Non-life insurance in Malaysia
Persatuan Insurans Am Malaysia (PIAM) is the national trade association of all licensed direct and reinsurance companies for general insurance in Malaysia. Currently, PIAM has 25 member companies comprising 21 direct general insurance and four reinsurance companies operating in Malaysia. These include Tokio Marine, AIG, Allianz, QBE, Zurich, AXA, Etiqa and Chubb.
Strong demand for insurance of vehicles, property, health and other insurances across Malaysia are driving the revenues of insurance companies in the country, and growing life expectancy, tax incentives on insurance products, and favourable savings associated with insurance are further encouraging customers to purchase insurance products of all kinds, according to Research & Markets. Economic growth, rising government spending, technological innovations and increased consumer awareness about insurance products are key market drivers in Malaysia. The government’s policy of insuring the uninsured has progressively pushed insurance penetration in Malaysia and led to a proliferation of insurance schemes.
Malaysia’s insurance industry is facing stiff competition as companies compete not only with each other, but also with risk retention groups, government, and self-insurance options crowding the market. Many large organisations self-insure for most employee benefits such as health coverage, which inevitably lowers market scope for insurance companies in this particular niche of the business.
Local market players in the country are focusing on marketing their competitive edge by rolling out more plans that have been customised to cater to more diverse sectors, and developing more innovative digital features.
A March 2021 report from AM Best found that although Malaysia’s non-life insurance industry is likely to have contracted in 2020 amid the Covid-19-fuelled economic disruptions, the health and medical insurance segment is experiencing growth driven by greater demand, and overall, according to a more recent AM Best report, the Southeast Asian country’s non-life insurers have reported good overall profitability and have maintained solid solvency positions.
According to global consultancy firm EY, non-life insurance lines have consistently outpaced growth in the life insurance segment, with a combined annual growth rate of around 7.5 per cent.
Takaful product growth
AM Best’s report also noted that the general takaful (Islamic cooperative insurance) sector had expanded robustly, with a five-year combined annual growth rate of 10 per cent (2015-2019). This growth is mainly due to a relatively low base and level of penetration from which the sector is growing, as well as the country’s significant Muslim population and the increasing appeal of takaful products given its surplus-sharing concept. Although the segment is relatively small and highly concentrated, AM Best is of the view that this sector will exhibit stronger growth than the conventional non-life insurers.
Distribution channels for insurance products
Research and Markets notes that the increasing number of digital distribution channels favours insurers that have adopted new technologies that allow easy access to insurance policies: investment in insurtech, messaging platforms, and online sales channels are contributing to the growth of the insurance landscape in the country.
Through different distribution channels, insurance companies in Malaysia are providing a wide variety of products with varying levels of complexity that are designed for different groups of businesses, individuals, and other organisations. This will provide ways to meet the emerging demands of every end-use customer and propel net sales.
The bygone era of ‘blanket policies’ and the one-size-fits-all approach is coming to an end as customers want highly relevant offerings and efficient processes – especially during their insurance claims journey – directly from their travel providers
Arijit Chakraborty, Managing Director, APAC at Cover Genius, spoke to ITIJ about how digitalisation is changing the way consumers buy products and make claims: “Customers around the globe are interacting online, in some capacity, for almost every aspect of their life, which is fuelling the digitalisation of products and services within the insurance sector. The bygone era of ‘blanket policies’ and the one-size-fits-all approach is coming to an end as customers want highly relevant offerings and efficient processes – especially during their insurance claims journey – directly from their travel providers.”
In a recent survey of the Southeast Asian market, travellers specifically noted their dissatisfaction with slow claims processes from traditional and online insurers, which took up to 10 days to process, averaging a post-claims NPS (Net Promoter Score) of -15. “In fact, in comparing recent purchases versus future purchase preferences for travel insurance, nearly half of travellers across Southeast Asia (47 per cent) would prefer to purchase travel insurance directly from their travel provider or agent for their next trip,” said Chakraborty.
“To improve claims experiences and increase customer satisfaction toward travel brands, we are seeing many regional players embrace Application Programming Interfaces (API) that offer instant claim payments and processes. For example, Agoda is a leading digital travel platform that operates in more than 30 countries, including Malaysia, that recently integrated XCover (Cover Genius’ global distribution platform) to offer travellers comprehensive travel protection and instant claim payments,” Chakraborty added.
Kamaludin Ahmad, Group CEO of Etiqa Insurance & Takaful, spoke to ITIJ about the personal accident insurance market in Malaysia, under which travel insurance falls. There is no published data on market share, as it’s all lumped under personal accident with regards industry data, but Ahmad says that he believes that his company is ‘probably number one’ for travel insurance sold online.
The company concentrates on several distribution channels, with the internet becoming ever more vital: “Our key channels,” he told ITIJ, “would be online, agency and bancassurance, other than our underwriting support to corporate partners. Over the past few years, more and more Malaysians have been buying their travel insurance online. We sold 25,000 policies online per month prior to the pandemic.”
The role that evolving technology is playing in the uptake of travel insurance is clear in many regions around the world, and it is enhancing the ability of insurers to react to consumer demand in ways the industry has not been capable of before. Ahmad noted: “There are many areas where technology has improved the service we provide to clients. For example, we have access to flight data and cross-check flight timing to automatically credit payment to our travel policyholders in the event of delays before they even lodge a claim.”
Outbound travel recovery bodes well for future travel insurance sales
Pre Covid, the Malaysian outbound travel market was enjoying significant growth, with outbound departures exceeding 13 million, and expenditure of those travellers also increasing. The average number of nights spent on holiday was 9.9, and the average spend per person on a trip (to Europe) was US$1,500. According to research from ETC Corporate, the top European destinations Malaysians were most likely to visit were, in order, Switzerland, the UK, France, Italy and Austria – none of them cheap for healthcare, and all require minimum amounts of health cover from visitors outside the Schengen Area.
Most important for insurers, though, is the information about how these travellers were researching and booking their holidays online. Partnering with these outlets can give insurers new opportunities to engage with potential customers during the buying process. The top-five online information sources used were:
- 64% social media
- 53% travel review sites
- 39% search engines
- 35% travel booking and comparison websites
- 26% travel agent/tour operator websites.
Raudhah Hirschmann, a researcher for Statista, commented in the report that, Covid notwithstanding, economic challenges are not a barrier to travelling for Malaysians: “Malaysians might be complaining about the increasing prices of everyday goods; however, they were loath to sacrifice their holidays.
North Asian countries such as Taiwan and South Korea have increasingly gained popularity amongst Malaysian travellers
While the economic situation was not preventing Malaysians from travelling, it was affecting the types of trips that were made, with regional destinations preferred over long-haul trips. Neighbouring Indonesia had always been a well-loved destination for Malaysians, with Malaysian tourists contributing an average of US$720 per visit in 2016, which is considerably higher than what their Singaporean counterparts spent.”
She continued: “In recent years, North Asian countries such as Taiwan and South Korea have increasingly gained popularity amongst Malaysian travellers. With South Korean culture, particularly K-Pop, enjoying huge success in Malaysia, an increasing number of Malaysians have made South Korea their holiday destination of choice. South Korea’s recognition of the booming halal tourism market had also made it easier for Malaysians, a significant majority of whom are Muslims, to travel there.”
As Asia opens back up to travel again, awareness of travel insurance and its benefits is going to continue its upward trajectory, and there will be opportunities for affinity deals and distribution partnerships in more countries. With the Malaysian population keen to travel again, industry players are confident that there is plenty of scope for growth in the future.
Ahmad told ITIJ: “Definitely, as more and more Malaysians get bitten by the travel bug, both the total addressable market and the online market for travel insurance will grow stronger both in terms of the number of policies as well as the value of the policies as Malaysians travel further and for longer periods.”
Chakraborty of Cover Genius concluded: “With current market uncertainties, global customers, including those in Malaysia, want to feel secure in their purchases. They want to know that they’re protected from whatever might come their way and they expect their online experiences to be seamless. If brands aren’t embracing the digitalisation of insurance processes, like claims, they will fall behind.”