KUALA LUMPUR: The Malaysian motor insurance industry is expected to maintain upward growth for the next five years, driven by an increase in vehicle sales and rising premiums, said GlobalData insurance analyst Swetansha Chauhan.
Chauhan said according to data by the Malaysian Automotive Association (MAA), total vehicle sales increased by 12.5 per cent to reach 799,731 units in 2023 from the previous year.
This was supported by a backlog of bookings from the sales tax exemption period that ended in March 2023.
"Malaysian motor insurance industry growth peaked in 2022, driven by economic recovery and favorable regulatory developments that have led to an increase in vehicle sales.
"The high demand for vehicles has aided motor insurance growth in 2023, a trend that is expected to continue in 2024," she said in a statement.
Chauhan said rising premium prices will also support motor insurance growth.
She said the prices for automobiles have increased over the last couple of years due to excess demand and global economic volatility, which has led to an increase in premiums for motor insurance policies.
"Additionally, starting from March 1, 2024, the Malaysian government raised the service tax on motor insurance policies from 6.0 per cent to 8.0 per cent, leading to an increase in overall cost for policyholders.
"Labour charges associated with repairs and maintenance will be subject to the higher tax rate, which will also lead to a rise in premium rates," she said.
However, Chauhan said insurers' profitability is expected to remain challenged over the next few years due to increasing claims and rising inflation.
Along with a growth in premiums, there was an increase in claims in 2023, which has returned to pre-pandemic levels.
According to the General Insurance Association of Malaysia (PIAM), the loss ratio for motor insurance grew by 1.4 percentage points to reach 66.7 per cent in 2023 due to an increase in accident rates.
"Consequently, the average motor insurance claims paid per day increased to RM 15.1 million in 2023 from RM 13.0 million in 2022, marking the highest increase in the past five years," Chauhan said.