Malaysia’s general insurance industry was able to weather the COVID-19 pandemic in 2020, outperforming the country’s overall economy, according to a report by Malaysian Re.
The report, which was produced in cooperation with Switzerland-based Faber Consulting, revealed that while Malaysia’s GDP is expected to have dropped by 4.5% in 2020, general insurance premiums remained almost stable.
The decrease in GDP is a swing of roughly nine percentage points from the initial forecast of 4.4% growth for 2020. Despite the government giving economic stimulus packages of around MYR300 billion (SG$99 billion), the country is expected to have missed out on close to MYR200 billion in growth in 2020, the report said.
In contrast, the general insurance sector was hit by a 3.6% decrease in gross direct premiums in the first half of 2020, but by the end of the third quarter, the industry had recovered to a loss of -1.2%, with strong sales in the third quarter and recovery in the manufacturing sector.
The Movement Control Order (MCO), which sought to restrict the spread of the virus, significantly lowered loss ratios in the motor, health and travel insurance lines due to decreased activity. Restricted movement also hastened the digitisation of the insurance sector, with insurers harnessing technology to stay connected with customers, employees and agents. Insurers also benefited from digital transformation, especially in retail segments, as consumers became more digital-savvy, buying and managing their affairs through online channels.
“As an industry, Malaysia's insurers are not convinced that the industry had been prepared for an event as the COVID-19 pandemic,” the report said. “However, insurers were mostly proud of how quickly their organization, the industry and the country responded to the extreme circumstances brought on by the pandemic. Both [general insurance and life insurance] industry associations and Bank Negara worked closely together to ensure the smooth continuation of services to policyholders. The introduction of a risk-based capital regime and the industry's early investment in IT also paid off as during the pandemic the industry’s performance remained robust.”
