Posted on Sep 28, 2011 by Sergio Ulloa
New figures released this month by Malaysia's insurance authorities have provided ample evidence of the country's continued development into one of Asia's most promising general insurance markets.
Malaysia's economy grew at 7.2 percent last year, the highest rate experienced since the year 2000. The Malaysian government has continued to aggressively pursue substantial investment programs with the explicit goals of doubling GDP per-capita and turning Malaysia into a high income country by 2020. New parliamentary initiatives such as the New Economic Model (NEM), Economic Transformation Program (ETP) and the Tenth Malaysian Plan will, according to industry analysts, eventually contribute to a growth in demand for insurance products and services
. However, despite these initiatives, the insurance industry in Malaysia currently faces numerous challenges as customers tighten their belts and become more skeptical toward the importance of protecting assets through insurance. The industry believes that general insurance agents must now play a greater role in order to weather the volatile economic and financial challenges.
In response to these challenges, the Malaysian Insurance Institute (MII), one of the country's three insurance associations, organized the General Insurance Agents Convention
for all general insurance agents in Malaysia on September 13, 2011 in Kuala Lumpur. The event was attended by 500 participants and encouraged discussion amongst industry professionals about how to best address the issues facing Malaysia's emerging general insurance market going forward.
Speaking at the conference, Khadijah Abdullah, MII Chief Executive Officer, revealed that Malaysia's general insurance agency force is projected to grow by over a quarter this year, up from the roughly 35,000 registered agents active in the country in 2010. This promising forecast is based on new MII data, which showed than an average of 800 new candidates per month had taken the insurance agents exam during the first half of the year. Not only are more Malaysian citizens realizing the importance of adequate insurance coverage, many are clearly now looking to the industry for employment opportunities. "A career as a general insurance agent is still attractive and very much sought after," Khadijah Abdullah told convention attendees.
An increased agency force is vital to the future development of the Malaysian general insurance sector. Together with bancassurance, agents remain the most effective distribution platform for insurers in the Asia Pacific country. According to the General Insurance Association of Malaysia (PIAM), total general insurance gross premium amounted to MYR13 billion (US$4.1 billion) in 2010, of which agents contributed MYR7.4 billion (US$2.35 billion). In lieu of more technologically advanced distribution and promotion platforms, more agents will continue to be required throughout Malaysia as demand for insurance solutions escalates.
The changes in consumer attitude towards insurance in the Asia Pacific region have become more readily apparent. A new study released last week by ING Insurance Berhad
showed that 83 percent of all Malaysian consumers believe that there is now a much greater need to protect their lifestyles now than compared to just 12 months ago. Rising healthcare costs and lifestyle expectations has enabled the attitude towards and awareness of insurance to change very quickly. Overall, the rise in income, healthcare, education and housing opportunities across most of Asia, have given families in the region greater access to a lifestyle they would now like to protect.
As the insurance industry continues to develop in Malaysia more regulatory measures are expected in the near future to update the market and more closely match international standards. For example, The Malaysian Central Bank (BNM) has recently come out with revised guidelines on motor insurance, aimed at curbing fraud and ensuring consumers understand the appropriate market value of their motor vehicle when applying for comprehensive coverage. The new measures came into effect on August 1st 2011 and have already worked to address many grievances in the motor insurance sector. In addition, Malaysia's government has committed to the gradual financial liberalization of its Islamic finance sector
and plans are also underway to introduce compulsory travel insurance cover for all Malaysians flying overseas by year's end.
The MII advised that while these measures could do much to improve insurance awareness and coverage in Malaysia, their goals will not be realized without an adequately trained agency force, and this will take time and resources to achieve. "This requires the agents to have an in-depth knowledge and ability to advise their clients," Khadijah Abdullah said, adding that further collective action would need to be taken to ensure best business practices are consistently maintained in Malaysia's general insurance market "As an industry as a whole, we are driving higher professionalism as well as quality standards and in this respect, all stakeholders have to work together to achieve aims and objective."
While both the numbers of agents and clients in the general insurance market are poised to grow, premium levels, with the exception of government subsidized motor and fire insurance lines, are expected to remain relatively stable due to intense competition amongst both domestic and foreign insurance players in the country. Malaysia has already proven to be an attractive location for several of the world's most prominent insurers and they are bringing their expertise to the country to great effect. Prudential Assurance Malaysia Bhd (PAMB), a local joint-venture operation with the UK's largest insurer by market value, posted a 13 percent increase in new business sales in the first half of 2011 and are now confident of surpassing last year's totals. Indeed, Prudential now believes that the strength of its Asian business will continue to protect the insurer against the worst of another potential financial crisis in the West. These same sentiments were echoed earlier in the year by Allianz
, who are themselves undertaking numerous initiatives to improve their distribution capabilities in the region.
Allianz Group is one of the leading global services providers in insurance and asset management. With a worldwide network of 153,000 employees, the Allianz Group serves 75 million customers in over 70 countries. Allianz offers a wide variety of insurance products to both private and corporate customers, including motor, accident, general liability, fire and property, legal expenses, credit and travel insurance. Allianz provides life and health insurance products on individual and group basis. Allianz is the market leader in the German market and has a strong international presence in insurance.
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
ING provides banking, investments, life insurance and retirement services and operates in more than 50 countries. It serves more than 85 million private, corporate and institutional customers in Europe, North and Latin America, Asia and Australia.
Bank Negara Malaysia
Bank Negara Malaysia is Malaysia's central bank, tasked with overseeing the nation's economic and financial systems.