KUALA LUMPUR: The Malaysian insurance industry will undergo its most significant transformation over the next 5 to 10 years in decades and addressing the extent of underinsurance in the country is key says Bank Negara Malaysia assistant governor Jessica Chew Cheng Lian.
"The insurance landscape is expected to change in ways that will have a direct and profound impact on the experience that consumers and businesses have with insurance,"she said in a keynote address at the general insurance agents convention today.
" As major intermediaries between insurance providers and consumers of insurance products and services, how insurance agents think about their business and interact with their customers can make an important difference in helping millions of individuals, families and businesses across the country who remain ill-prepared for losses arising from unforeseen events."
Addressing this protection gap is ultimately the goal that is aspired, to promote a resilient economy and the well-being of the society.
She said the insurance industry itself has just entered the first phase in the progressive liberalisation of the motor and fire insurance tariffs which began in July.
After over 30 years during which more than 60 per cent of the general insurance market has been regulated under tariffs, this is arguably the most significant reform of the general insurance market in decades.
Jessica said the general insurance penetration level in Malaysia measured in terms of premiums as a share of GDP stands at 1.68 per cent as at end 2015.
In comparison, premiums as a share of GDP are about 3 to 4 per cent in more developed markets.
"There is reason to believe that the extent of underinsurance is widening given the growth in economic activity and higher risk exposures. "
As an example, during the December 2014 flooding in the east coast of Malaysia, total economic losses were RM2.6 billion while insured losses paid as at end-2015 were only a fraction of that at about RM100.0 million.