Malaysian General Insurance Marketing Systems

Marketing tactics and strategies are developed by all insurer to increase sales and sustain marketplace positions by targeting at customer needs as well as future market trend.

Database development

The gathering and analyzing of data is important prior to marketing decision. Insurance companies develop a database to identify their current customers. Companies use this information, referred to as customer relationship management data, to gain an understanding what types of policies are leading in sales and to identify growth opportunities to expand and increase sales.

Besides, the database serves to include the rating factors of each of the exposures, claim counts and claim costs for the purpose of risk classification. In motor insurance business for instance, vehicle’s cubic capacity (c.c.) may be considered as a rating factor while the claims may be divided into several types such as Own Damage (OD), Third Party Property Damage (TPPD) and Third Party Bodily Injury (TPBI) (Pan, Jemain, & Ismail, 2008).

As motor insurance sector in Malaysia is expected to be completely liberalized, large customer database with accident or no claim history would help insurer to price the premium. Premium rates would be differentiated in accordance with the risk profile of individual customer. Drivers with good claims experience would enjoy much better premium rates than those with a higher risk profile (Dhesi, 2014).

Competitive Analysis

Companies continually assess the marketing efforts of competitors. They conduct competitive analysis efforts to identify what other companies are doing in terms of pricing, product offerings, target consumers, advertising creative works and brand positioning.

Malaysia general insurance companies come out with different marketing and branding strategies to actively reach out the community. Community service would be one of the common way adopted in conjunction with recognizing the importance of corporate social responsibility. For instance, in Allianz Malaysia, Allianz4Good is the brand name for their Corporate Responsibility (CR). It focuses on 4 main pillars, namely Road Safety, Financial Literacy, Community and Environment.

However, as the influx of marketing initiatives, it is becoming harder and harder for companies to stand out. Some insurance companies go further to invest in sponsorships. Tokio Marine Malaysia for instance, announced their sponsorship of the Muar City Badminton Club for the 2015-2016 season (Lim, 2015).

The concept of dual branding is new to the Malaysian insurance market, however it is widely practiced in mature markets overseas. In 2013, AmBank Group came out with the first dual branding in the market when it announced a new name for its general insurance subsidiary, AmGeneral Insurance Bhd, following its acquisition of Kurnia Insurans (M) Bhd. The company aim to retain the strong values their brands hold and what they mean to the loyal customers (KINIBIZ, 2013).

Product Development

Marketing helps insurer to identify opportunities for developing new insurance products that cater for customer needs.

As tourism is booming in Asia, insurance firms are capturing this business opportunity and reaping the benefits as demand for travel insurance grows alongside. In year 2010, Tune Money Sdn Bhd took the initiative by launching the Tune Travel Insurance plan which provides practical and economical travel insurance product and designed to cater all types of travelers, either leisure or business (JOHNYTIM.COM, 2012).
Figure 1. Malaysia: Direct contribution of travel & tourism to GDP.The direct contribution of travel and tourism to GDP primarily reflects the economic activity generated by industries such as hotels, travel agents, airlines and other passenger transportation services (excluding commuter services).

Source: World Travel and Tourism Council
Retrieved from https://www.wttc.org/-/media/files/reports/economic%20impact%20research/countries%202015/malaysia2015.pdf

Figure 2. AIG travel trend survey

Source: THE STAR ONLINE
Retrieved from http://www.thestar.com.my/business/business-news/2014/01/20/aig-malaysia-sees-at-least-20-travel-insurance-growth-yearly/

Besides, according to AIG Malaysia senior vice-president of consumer insurance Ganeswaran Subramaniam, AIG Malaysia Insurance Bhd sees good growth potential in the travel insurance business and expects the segment to expand at least 20% each year. In year 2013, travel insurance accounted for about 6% to 7%, or about RM30mil, of AIG Malaysia’s total portfolio. The company carried out The Travel Trend survey and take it as an annual exercise for better understanding of their customer.

Leveraging Marketplace Opportunities

Insurance companies leverage opportunities to plan their marketing efforts.

The world is rapidly shifting from analogue to digital. Digital turn out to be a new market force that is driving a massive change in consumer expectation. Despite the low level of digital maturity, Malaysia insurance firms had started to invest more in digital technologies to deliver new product and services. Insurers will need to drive innovation with the new channels and rethink how they interact with customers.

Figure 3. Malaysia E-commerce Market Size

Source: Malaysia Crunch
Retrieved from http://www.malaysiacrunch.com/2012/03/malaysias-e-commerce-statistics-updated.html#more

Beside online insurance, web aggregator is made available for consumer. It refers to online platforms that allow consumers to compare wide variety of insurance products in Malaysia in one go, from the premiums to key terms and conditions. There are web aggregators which provide 100% free consultation, Insurance Finder for instance.

Malaysian General Insurance Marketplace

Market Growth of General Insurance in Malaysia

The Malaysian general insurance market is highly competitive and dynamic. It had undergone a significant development since the last two decades. Figure 2.1 shows that from the year 2010 to 2014, the gross direct premiums of general insurance in Malaysia had hiked significantly from RM 12,584.70 million to RM 16,677.70 million (Bank Negara Malaysia, 2016). This growth is mainly due to the increase in sales of motor insurance which occupied the highest market share of general insurance in Malaysia. Furthermore, the sales of other insurance products sold in Malaysia also increased in the past few years. 

(Source: Bank Negara Malaysia, 2016)

Figure 2.1: Gross Direct Premiums for Malaysian General Insurance Market from the Year 2010 to 2014

According to Nurul Syuhada Nuruzmi (2014), motor insurance exhibits a strong growth from RM 5,922.2 million in the year 2010 to RM 7,447.6 million in 2014. On the other hand, the 24.9% growth in the fire insurance and the 13.1% growth in Marine Aviation and Transit insurance from the year 2010 to 2013 are also contributed in the overall growth in the Malaysian General Insurance Market. Moreover, there also exists a constant growth in the sales of other insurance products such as liability, personal accident, medical and health.

            However, Malaysian general insurance industry is anticipate a slower growth in 2016 due to the weakening of the ringgit against the US dollar, a cautious economic outlook, as well as moderation in consumer spending following the Goods and Services Tax (GST) implementation (Niam, 2015). But, the insurance industry players are still expressed confidence in the market since the growth in the market was still positive and strong.

Market Share of General Insurance Products in Malaysia

According to the General Insurance Association of Malaysia (PIAM) (2016), in the year 2015, motor insurance continued to obtain the highest market share (46.3%) with the highest gross written premium (RM 8.1 billion), followed by fire insurance (17.8%), MAT insurance (9.7%), personal accident insurance (7.5%), and medical and health insurance (5.5%). This is because motor insurance is mandatory in Malaysia. Vehicle owners are required to purchase motor insurance in order to obtain road tax for the vehicle (Bank Negara Malaysia, 2010). 

(Source: General Insurance Association of Malaysia, 2016)
Figure 2.2: Proportion of Insurance Products Sold in 2015 in Malaysia

General Insurance Buyers in Malaysia

(Source: Marketline, 2016)

Figure 2.3: Drivers of Buyer Power in the Non-life Insurance Market in Asia-Pacific in 2015

In Malaysia, there are three types of general insurance buyers: individual consumers, small and medium businesses, and large businesses and organizations. The buyer power in Malaysia is relatively low due to most of the market customers are individual customer (Marketline, 2016). They have a lower deal of bargaining power as compared to large business and organizations since they only have a little degree of influence to the insurance companies. Besides that, the buyer will also incur high switching costs if they intend to terminate their policy and switch to other insurer and hence this has further reduced the buyer power.

            On the other hand, the customer loyalty is low in Malaysian general insurance market, unless a long term policy has been purchased. Insurance buyers will shop around the market and do price comparison before they purchase the insurance products.

Direct General Insurers in Malaysia

There are 19 pure general business companies and 4 insurance companies consisting of both life and general businesses in Malaysia (Bank Negara Malaysia, 2016). The top 10 general insurance companies are Kurnia Insurans (Malaysia) Berhad, Allianz General Insurance Company (Malaysia), Etiqa Insurance Berhad, MSIG Insurance (Malaysia) Berhad, Chartis Malaysia Insurance Berhad, Berjaya Sompo Insurance, Uni.Asia General Insurance Berhad, AMG Insurance Berhad, MCIS Zurich Insurance Berhad, and AXA Affin General Insurance Berhad (Michelle,A., 2013). All of these companies are regulated by Bank Negara Malaysia.

            According to Nurul Syuhada Nurazmi (2014), there are a lot of challenges as well as opportunities for the direct general insurers in Malaysia. The most important issue faced by the insurance companies is under-pricing of motor and fire insurance products as the rate is tariff.  Therefore, most of the insurance companies will decline to insure the high risk drivers or vehicles. Hence, Malaysian Motor Insurance Pool (MMIP), a special-purpose entity set up and owned collectively by all general insurance companies operating in Malaysia will provide coverage to those who are unable to obtain motor insurance cover in the market (Overseas Assurance Corporation (Malaysia) Berhad, 2015).

However, in 2011, BNM had issued a New Motor Cover Framework which paved the way of de-tariffing of the motor business. Since 2012, motor insurance rates have been revised upwards yearly and is expected to detariff in 2016 (Tan,P, 2015). Same as motor insurance, fire insurance is also expected to detariff in 2016. After the detariffication, the premium rates of both products will be further differentiated in accordance to the individual risk profile of individuals, as well as potential pricing differences between insurers. 

References

Bank Negara Malaysia. (2010). Proposed Basic Motor Cover Framework Discussion Paper. Retrieved 2 February 2016, from http://www.bnm.gov.my/files/Discussion_Paper_TPBID.pdf

Bank Negara Malaysia. (2016). Annual Insurance Statistics 2014 (Table 1.1: Insurance Key Indicators. Retrieve 2 February 2016, from http://www.bnm.gov.my/index.php?ch=statistic&pg=stats_insurance&ac=121&yr=2014&lang=en

Marketline. (2016). Non-life Insurance in Asia-Pacific. Retrieved 2 February 2016, from http://eds.a.ebscohost.com.libezp.utar.edu.my/eds/pdfviewer/pdfviewer?vid=1&sid=db86e1ee-cfa2-4011-8953-4714ca913e1a%40sessionmgr4005&hid=4108

Michelle,A. (2013). Top Insurance Companies in Malaysia. Retrieved 2 February 2016, from http://news.malaysianreview.com/1548/top-insurance-companies-in-malaysia/

Niam, S.W. (2015). Industry Players Express Confidence In Malaysia's General Insurance Market. Retrieved 2 February 2016, from http://finance.bernama.com/news.php?id=1202519

Nurul Syuhada Nurazmi. (2014). Session 6 – General Insurance and Takaful Industry Market Trend in Malaysia. Retrieved 2 February 2016, from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjW_42Nnf7LAhWBWY4KHdD5B7cQFggiMAA&url=https%3A%2F%2Fwww.soa.org%2FFiles%2FPd%2F2014%2Fgeneral-insurance%2F2014-general-insurance-06.pdf&usg=AFQjCNGR8GmVoK8ky-LtGlniY-MyAqgjfg&bvm=bv.118817766,d.c2E

Overseas Assurance Corporation (Malaysia) Berhad. (2015). Malaysian Motor Insurance Pool (MMIP). Retrieved 2 February 2016, from http://www.oac.com.my/web/oac/malaysian-motor-insurance-pool

Tan, P. (2015). New motor insurance tariffs from February 23, 2015. Retrieved 2 February 2016, from http://paultan.org/2015/02/14/new-motor-insurance-tariffs-2015/

Introduction to General Insurance

1.0 Introduction

Insurance industry has been developing and improvising since it was brought into Malaysia. Currently, Bank Negara Malaysia (BNM) is the regulator which supervised and regulates the insurance companies, insurance brokers, adjustors and financial advisory companies. All the insurers in Malaysia are licensed by the Minister of Finance on the recommendation of the BNM (Zaid Ibrahim, 2015).

In Malaysia, insurance industry can be categorized into Life insurance, Takaful insurance, andGeneral insurance. In 2012, General insurance occupied 35.5% out of the whole insurance industry, which also implies that General insurance is very important (Frost & Sullivan, 2014). From years to years, general insurance industry has becomes more and more competitive as more and more company has been formed. There is no doubt that general insurance industry is still growing nowadays, and the demands of the market has increased from time to time also. General insurance protect insured against risk excluded in life insurance, which means that anything related to life benefits are excluded. There exist many types of general insurance to satisfy the demand of society.

According to ‘PersatuanInsurans Am Malaysia’ (PIAM) in 2016, general insurance consists of two categories: personal lines and commercial lines. Under personal lines, the insurance products are specifically designed for the public. On the other hand, insurance products under commercial lines are mainly sold to businesses or corporations. Table 1.0 highlights the major general insurance products sold in Malaysia and their descriptions.

Table 1.0: Major General Insurance Products Sold in Malaysia

Insurance	Description
Motor Insurance	Provides coverage on financial protection against physical damage by moving vehicle.
Fire Insurance	Includes coverage of loss cause by fire, lightning, or explosion of domestic appliances.
Medical and Health Insurance	Provides coverage on the cost of medical treatment for insured.
Personal Accident Insurance	Provides compensation when injuries, disabilities, or death happened accidentally and covers travel related accidents.
Marine, Aviation, and Transit (MAT) Insurance	Includes coverage for marine hull, aircraft, cargo and offshore goods.
Liability Insurance	Protects insured in the event of getting sued for claims that come within the coverage of the insured’s liability insurance policy.

Source: (PersatuanInsurans Am Malaysia (PIAM), 2016) &( Frost&Sullivan,2014)

General insurance market is a highly competitive and hence, marketing and distribution systems of the insurance companies determined the profit, gain and loss of their company.No doubt that to compete against others, different strategies, skills, and also financial knowledge must be apply to succeed in this industry. In this report, the demand and supply of insurance products in the general insurance marketplace, the marketing strategies used by the insurance companies, different distribution systems and the distribution channels used in Malaysian general insurance companies will be discussed.

2.0 Malaysian General Insurance Marketplace

Insurance Companies in Malaysia

No.	Name
1	AXA Affin General Insurance Berhad
2	AmGeneral Insurance Berhad
3	Berjaya Sompo Insurance Berhad
4	DanajaminNasionalBerhad
5	Lonpac Insurance Berhad
6	MPI GeneraliInsuransBerhad
7	Pacific & Orient Insurance Co. Berhad
8	Progressive Insurance Berhad
9	RHB Insurance Berhad
10	Tune Insurance Malaysia Berhad
11	ACE Jerneh Insurance Berhad
12	AIG Malaysia Insurance Berhad
13	Allianz General Insurance Company (Malaysia) Berhad
14	Liberty Insurance Berhad
15	MSIG Insurance (Malaysia) Bhd
16	Overseas Assurance Corporation (Malaysia) Berhad
17	Pacific Insurance Berhad, The
18	QBE Insurance (Malaysia) Berhad
19	Tokio Marine Insurans (Malaysia) Berhad

            Table 1.1: List of Companies. Information obtain from www.bnm.gov.my.