The motor insurance industry of Malaysia is set for notable gains over the next few years, growing to MYR13.4 billion (US$3 billion) in 2027 with a compound annual growth rate (CAGR) of 9.6% in terms of direct written premiums (DWP).
According to GlobalData’s latest insights, the sector has bounced back with an annual growth rate of 9.2% in 2022 following three straight years of decline from 2019 to 2021. Recovery was supported by an increase of vehicle sales, with the market growing by 41.6% in 2022 compared to a 3.9% downturn in 2021, as per figures from the Malaysian Automotive Association (MAA).
Another factor for this growth spurt was the country’s National Economic Recovery Plan in June 2020 that provided 100% sales tax exemption on the purchase of locally assembled vehicles and a 50% exemption on imported vehicles. This tax break was effective until June of last year; however, the registration period for the purchase of vehicles was further extended to March 2023 owing to the continued shortage of semiconductors. This, in turn, resulted in a year-to-date sales volume growth of 12.3% in May 2023.
GlobalData insurance analyst Prasanth Katam said that the sector is forecast to record an annual growth of 7.6% this year, thanks to economic recovery and initiatives by the government to increase the sales of vehicles. The country’s economy is expected to expand by 4% this year and another 4.4% next year, which will further boost the automotive sector’s sales. That said, Katam also cautioned insurers in the country with risks that the sector will face in the next few years.
“Despite a growth in premiums, insurers in Malaysia will need to evaluate their risk exposure due to an increase in accident claims, increased frequency of natural calamities and rising inflation, which has significantly increased the cost of repairs,” Katam said. “To mitigate the impact of increasing claims and reduce fraudulent claims, Malaysian insurers are adopting technologies, such as telematics and artificial intelligence (AI). AI is helping insurers to identify fake accident claims or claims that are inflated.”
Elsewhere in the country, Malaysian Domestic Trade and Cost of Living (KPDN) minister Datuk Seri Salahuddin Ayub has announced affordable insurance and takaful packages under the Putrajaya Rahmah initiative, with the packages coming from Allianz Genera, Etiqa General, and Etiqa General Takaful.
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