The increased financial literacy of Malaysians has led to a rise in the demand for various types of general insurance in the country.
Coupled with this, the growing income per capita is opening up a host of opportunities for general insurance providers.
New analysis from Frost & Sullivan, Overview of the General Insurance Industry in Malaysia, finds that the industry earned a gross direct premium of RM 15.31 billion in 2013 and estimates this to reach RM 23.33 billion in 2018 at a compound annual growth rate of 8.8 percent.
The study covers marine, aviation and transit (MAT), fire, medical and personal accident (PA), and motor insurance, among others.
"Heightening awareness on the benefits of insurance and the need for protection arising from concerns surrounding escalating medical and healthcare costs are expected to fuel the medical and personal accident (PA) insurance segment," said Frost & Sullivan Business Financial Services Senior Consultant Tay Soon Ee. "The increase in outbound travelers and the Hospitalization and Surgical Scheme for Foreign Workers (SPIKPA) – that mandates all foreign workers to have medical insurance coverage – too is boosting the prospects of medical and PA insurance providers."
The motor insurance segment will grow steadily over the forecast period due to the rising sales of vehicles and new motor cover framework that allows for gradual adjustments of the motor tariff premium. The segment will see a boost in 2016, in particular, when the tariff for motor insurance is expected to be removed altogether.
Further, the improvement in trade and business sentiments, especially with the implementation of the Economic Transformation Program, is likely to spur the growth of the MAT insurance segment, which is traditionally positively correlated to the growth of Malaysia’s economy. Considerable demand for fire insurance is also anticipated due to the growing property market.
"Other key trends include the liberalization of the general insurance industry as well as the Malaysian Government’s drive to encourage consolidation, both of which are expected to lead to fewer new players entering the market," noted Tay. "Along with the Malaysian Government’s initiatives, the need to comply with higher capital standards dictated by the Risk-based Capital framework is strengthening the incentive for consolidation among players in the general insurance sector."
Owing to the liberalization of the industry, local insurance companies will continue to be attractive merger and acquisition targets for foreign players, especially after Bank Negara Malaysia raised the foreign ownership limit from 49 percent to 70 percent.
Overview of the General Insurance Industry in Malaysia is part of the Financial Benchmarking in the Insurance Industry Growth Partnership Service program. Frost & Sullivan’s related studies include: Merger and Acquisition Trends in the Global Food and Beverage Industry, Mergers and Acquisitions Trends in the Global Property and Casualty Insurance Industry, and Mergers and Acquisitions Trends in the Global Banking Industry. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.