The general insurance sector in Malaysia has observed a 7.3% increase in gross direct premiums, reaching RM10.5 billion in the first half of 2023, compared to the same period last year.
However, figures from the General Insurance Association of Malaysia (PIAM) revealed that the underwriting profit has declined by 37.8%, settling at RM0.5 billion. This decrease is primarily attributed to reduced profitability in motor and fire insurance lines.
The motor portfolio, in particular, saw a RM0.2 billion loss due to a combination of heightened claim experiences and increasing costs for vehicle spare parts in Malaysia. Similarly, the fire portfolio's profitability was impacted by frequent flood events and rising reinsurance costs.
Despite its decrease, motor insurance remains the largest contributor to the sector, accounting for 44% of total premiums. The motor line recorded an underwriting loss of RM54 million, despite an 8% growth in gross direct premiums to RM4.6 billion. The net claims incurred ratio worsened to 67.1%, reflecting a return to pre-pandemic levels.
The fire insurance line experienced an 8% increase in premiums, totalling RM2.11 billion. The growth is partly due to heightened activity in residential and commercial construction and increasing demand for flood coverage. However, the underwriting margin for fire insurance contracted to 26.8%, impacted by inflation, tariff adjustments, competitive pressures, and more frequent flood events.
Marine aviation and transit (MAT) insurance, with a 9% share of total premiums, saw a slowdown in growth to 3.5% in the first half of 2023, compared to 7.2% in the previous year. In contrast, the miscellaneous classes, holding 16% of total premiums, displayed a 15.6% year-on-year increase, driven by the robust performance of construction all risk (CAR) and engineering business premiums amid post-pandemic infrastructure project acceleration.
Conversely, the personal accident (PA) line, making up 6% of total premiums, witnessed a 15.5% decline in premiums year-on-year, aligning with pre-pandemic levels. This decrease is linked to the conclusion of the Perlindungan Tenang Voucher (PTV) Program and potential increases in loss ratios for Travel PA due to resumed travel and related disruptions.
Medical and health insurance (MHI) showed a significant 15.2% increase in premiums, although it saw a 23.5% lower year-on-year margin.
In 2022, flood events in Malaysia caused total losses of RM622.4 million, equating to 0.03% of the country's nominal GDP. The losses were primarily in public assets and infrastructure, living quarters, and agriculture, with the largest share of 37.4% in public assets. The 2021 major flood event incurred economic losses of RM6.1 billion, equivalent to 0.4% of Malaysia’s GDP, significantly affecting the fire insurance business.
Following these flood events, there has been an increased awareness among policyholders regarding flood coverage. This is evident in the growing uptake of optional flood coverage in motor and fire policies, with a 2% increase in both portfolios to 14% and 33% respectively.
In terms of claims, the general insurance industry in Malaysia settled nearly RM23 million daily in total insurance claims in the first half of 2023, a 23% increase from 2022. Over the past decade, motor claims have dominated the payout, averaging RM16 million per day and constituting 70% of the total payout. In 2022, there was a notable shift, with motor claims rising to RM13 million per day and further increasing to nearly RM16 million per day in the first half of 2023, surpassing pre-pandemic levels.
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