Malaysia’s motor insurance market is expected to grow from MYR8.2 billion (US$2 billion) in 2018 to MYR9.7 billion (US$2.4 billion) in 2023, in terms of net earned premium (NEP), according to an industry report by GlobalData.
The report outlined that that motor insurance, one of the compulsory insurance classes, is a key driver of the Malaysian general insurance industry. As of end-2018, motor contributed 56% of the total general insurance NEP.
“A key factor shaping the market is liberalisation in motor insurance product pricing – with the first phase completed in 2016 followed by the next ongoing phase since 2017,” said Priyadarshini Ganai, insurance analyst at GlobalData. “It allowed market-based pricing of comprehensive and third-party insurance policies besides enabling new product offerings. In 2019, there were 66 new product launches in motor insurance – highest among all lines of general insurance business.”
De-tariffication in motor insurance allowed the industry to introduce consumer risk-profile based policy pricing. This led to lower average premium prices and benefited existing and potential customers.
However, the report said that profitability remains a challenge in the industry. Insurers face escalating claims on account of rising motor accident and fraudulent claims. According to the General Insurance Association of Malaysia, motor insurance claims amounted to MYR14.9 million per day, in the first half of 2019. As a result, insurers are turning to technology to improve efficiency.
“The General Insurance Association of Malaysia’s stated goal is to reduce motor accidents by 50% in collaboration with the Ministry of Transport,” said Ganai. “For insurers, this will help reduce claims and improve profitability. Furthermore, motor insurers could look forward to a better business environment as pricing gets completely liberalized by the end of 2020.”
