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/