KUALA LUMPUR, 27 February 2020 – The General Insurance Industry registered a decline of 0.8% in 2019 with total gross direct premiums of RM 17.41 billion. Motor remained the largest class with a market share of 48.3% followed by Fire at 19.3%.
Motor insurance recorded gross direct premiums of RM 8.42 billion with a drop of 0.4%. This is despite an increase in total new vehicle sales in 2019. Motor insurance have been registering underwriting losses for more than 10 years.
Average premium per policy has been on a downward trend since 2016 while overall costs of vehicle repairs have risen owing to increases in motor spare part prices amongst other factors. In 2019 an underwriting loss of RM 335 million was recorded with RM 5.48 billion being paid out in motor claims.
On a daily basis this amounts to RM 15 million per day paid out by motor insurers for property damage, bodily injury and vehicle theft. A major factor is the high accident and fatalities nationwide.
Over the past years, PIAM together with its member insurers have worked closely with all stakeholders to support the Government’s initiatives to inculcate safe driving behaviour among the motoring public. It was noted in The Star report dated 30 January 2020 that the police issued more than 290,000 summons of which 63% were for serious violations such as running the red light, speeding, driving on the emergency lane and overtaking on double lines.
In the pricing of motor insurance premiums, it is important to reward the good risks and charge the bad drivers more. This means that a driver who is in a class that is more likely to experience road accidents should pay a higher insurance premium compared to a good driver with a clean record.
PIAM is currently in discussion with the regulator Bank Negara Malaysia on the next phase of the motor tariff liberalisation to adopt a more equitable approach through the use of risk-based pricing models. There will be incentives for safe drivers with accident-free records. In this way, PIAM hopes that the high-risk drivers will be motivated to effect a change in their driving behaviour to enjoy the benefit of a lower insurance premium.
“The general insurance industry provides emergency assistance and peace of mind to road users through the Accident Assist Call Centre (AACC). Launched in 2013 the AACC dedicated toll-free hotline 15-500 operates 24/7 nationwide offering immediate roadside assistance to the general public – whether resulting from a road accident or a breakdown. AACC is able to help check insurance coverage and to connect with the road user’s own insurer.”
Mark Lim, PIAM CEO
Meanwhile, the number of stolen vehicles continued its downward trend in 2019 declining 21% from 13,581 to 10,729 vehicles for all classes. Since 2014 lesser vehicles have been stolen year on year. PIAM and the Vehicle Theft Reduction Council of Malaysia (VTREC) commend the unrelenting efforts, commitment and hard work of the Police, Customs and other law-enforcement agencies to combat vehicle theft in the country.
Fire insurance grew 1.1% and maintained its position as the second largest class with gross direct premiums of RM 3.37 billion.
Marine Aviation and Transit (MAT) insurance surged 5.3% with gross direct premiums of RM 1.35 billion owing to a recovery in the Offshore Oil Related sector. The Miscellaneous Class recorded a drop of 2.9% with gross direct premiums at RM 2.08 billion.
Medical and Health insurance (MHI) declined 11.4% to RM 1.02 billion while Personal Accident insurance dipped 1.3% to RM 1.19 billion. Medical claims have been on the rise owing to inflation and a host of other reasons.
Malaysia has one of the highest medical inflation rates in ASEAN in the recent years. The expected increase in medical claims for 2019 was 13 percent. A joint industry task force has been set up to better understand and address medical inflation. The critical issue for insurers and consumers is price transparency so that consumers can make informed choices on the cost of treatment.
PIAM welcomes the Ministry of Health’s move in December 2019 to mandate the disclosures of consultation fee up front and they believe that this should be extended to charges of common medical procedures in all private hospitals. In this regard, private hospitals in Malaysia should publish their actual average costs similar to what is currently practised in some countries.
Looking ahead PIAM foresees that the Malaysian economy will experience weaker growth having recorded the lowest level of growth in 4Q 2019 at 3.6% since 3Q 2009. Challenges in the operating and business climate remain. The current COVID-19 crisis will compound the situation further with a significant dampening impact.
PIAM anticipates the general insurance industry will continue to stagnate for 2020.