Its penetration rate in Malaysia is low, tracking at 1.2% for 2018 compared to the global average of 3%,
By DASHVEENJIT KAUR / Pic By RAZAK GHAZALI
THE general insurance industry saw a dip in the first half of 2019 (1H19), shrinking 1.4% year-on-year due to low penetration rates and escalating claims.
The General Insurance Association of Malaysia (PIAM) said gross direct premiums stood at RM8.92 billion for the first six months of 2019 compared to the same period last year.
PIAM chairman Antony Lee said motor insurance — the dominant class — was relatively flat with a marginal decline of 0.2% at RM4.18 billion, while fire insurance grew 2.5% to RM1.73 billion.
“The industry is confronted with twin challenges: (A) low penetration rate and escalating claims,” he told reporters at PIAM’s 1H19 media briefing in Kuala Lumpur yesterday.
Lee said the general insurance penetration rate in Malaysia (total premiums as a percentage of GDP) is low, tracking at 1.23% for 2018 compared to the global average of 3%.
Additionally, he said rising claims — particularly for medical and health, as well as motor — posed major concerns to insurers.
“Medical inflation has been on an upward trend with double-digit increases in recent years and is projected to reach 14% in 2019.
“The insurance industry has set up a joint task force to study the cost drivers in medical inflation and will submit recommendations to the authorities to contain medical costs for the benefit of all stakeholders and the insuring public,” Lee added.
On motor claims, insurers paid out a staggering RM14.9 million per day in property damage, bodily injury and vehicle theft for the first six months of this year.
Data compiled by the association shows that although road fatalities had decreased 6.7% from 6,740 in 2017 to 6,284 in 2018, the number of road accidents continued to go up.
Lee said based on statistics published by the Ministry of Transport, a total of 548,598 accidents were recorded in 2018 (2017: 533,875 accidents; 2016: 521,466 accidents and 2015: 489,606 accidents).
He added that the number of accidents went up by 12% over a three-year period from 2015.
Lee said PIAM will adopt a targeted and focused approach in an industry-wide effort to inculcate safe driving behaviour and reduce road accidents.
“The plan is to implement this at the state level by zooming into the high accident-prone areas and collaborating with the relevant authorities and enforcement agencies.
“States which achieved significant reductions in both accidents and fatalities will be incentivised in a road safety campaign which PIAM is planning to launch in the coming months,” he said.
Lee said the industry also looks forward to further liberalisation of the motor tariff, which will allow premiums to be priced according to the risk profile of motorists.
Meanwhile, vehicle theft counts continued to decline for the sixth consecutive year.
Lee said the total number of stolen vehicles went down by 26% from 7,027 to 5,173 vehicles for all classes during 1H19.
As for the industry’s future prospects, he said the outlook will continue to be challenging, given the uncertainties in the external environment with ongoing trade tensions between the US and China.
“PIAM expects recovery in the next six months to be slow and the industry is likely to stagnate for the full year 2019,” he added.