The Malaysian motor insurance market is projected to expand at a compound annual growth rate (CAGR) of 7.5%, growing from MYR10.6 billion (US$2.3 billion) in 2024 to MYR14.2 billion (US$3.1 billion) in 2028, according to a forecast by GlobalData.
Insights from GlobalData’s Insurance Database suggest that motor insurance will represent over 45% of the Malaysian general insurance sector by 2024. This segment is forecasted to grow by 8.8% in 2024, driven by an increase in vehicle sales and higher premium prices for motor insurance policies.
“Malaysian motor insurance industry growth peaked in 2022, driven by economic recovery and favourable 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,” said Swetansha Chauhan, insurance analyst at GlobalData.
The Malaysian Automotive Association (MAA) reported a 12.5% rise in vehicle sales in 2023, reaching 799,731 units compared to the previous year. This surge was partly due to a backlog of bookings from the sales tax exemption period, which concluded in March 2023.
The exemption included a 100% sales tax waiver on locally assembled vehicles and a 50% waiver on imported vehicles purchased between June 15, 2020, and March 31, 2023.
Chauhan highlighted that rising premium prices would support the growth of motor insurance.
“Rising premium prices will also support motor insurance growth. 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,” she said.
Effective March 1, the Malaysian government increased the service tax on motor insurance policies from 6% to 8%, raising the overall cost for policyholders. Labour charges for repairs and maintenance will also be subject to the higher tax rate, contributing to increased premium rates.
In 2023, claims rose, returning to pre-pandemic levels. Data from the General Insurance Association of Malaysia (PIAM) indicated that the loss ratio for motor insurance increased by 1.4 percentage points to 66.7% in 2023 due to a rise in accident rates.
The Traffic Investigation and Enforcement Department in Malaysia reported a 9.7% rise in traffic accident cases, totalling 598,635 in 2023 from 545,588 in 2022. Fatalities also increased by 104%, reaching 2,417 in 2023 compared to 1,183 in 2022.
Consequently, the average motor insurance claims paid per day increased to MYR15.1 million in 2023 from MYR13.0 million in 2022, marking the highest increase in the past five years.
The government began phasing in the liberalisation of motor insurance pricing in 2016, allowing insurers to adjust premiums based on consumers’ driving behaviour. Phase 2B of this initiative, which started on July 1, 2023, allows for premium adjustments of up to 20%, up from the previous limit of 15%.
GlobalData said drivers with good driving records will benefit from greater premium reductions, lowering their insurance costs, while those with poor driving records may face higher premiums.
“This will prompt insurers to launch more personalized products that will make motor insurance more affordable for people with good driving behaviour while also encouraging safe driving,” Chauhan said.
GlobalData said insurance companies are investing in advanced technologies to remain competitive and reduce costs. Digitalisation has improved many aspects of the insurance process, from underwriting to risk analysis, enhancing operational efficiency.
Additionally, artificial intelligence and machine learning tools are making underwriting more accurate and efficient, as well as helping to identify fraud and irregularities in the claims process.
“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. However, insurers’ profitability is expected to remain challenged over the next few years due to increasing claims and rising inflation,” Chauhan said.
In other news from Malaysia, cybersecurity threats have surged in the country in the past six months, according to a tech company’s study.
