KUALA LUMPUR: The general insurance industry continues to be confronted with twin challenges of low penetration rate and escalating claims, and this has put the business sustainability in question, said a top industry executive.
General Insurance Association of Malaysia (Piam) chief executive officer Mark Lim said rising claims particularly for medical and health as well as motor posed major concerns to insurers.
He said net motor claims incurred for the first half of this year stood at RM2.7 billion, a continuous increase since the first half of 2015.
“Insurers paid out a staggering RM14.9 million a day on motor claims such as for property damage, bodily injury and vehicle theft.
“In 2018, the total number of road accidents had increased 51 per cent to 548,598 cases since 2007,” Lim told a media briefing here.
“The medical inflation has been on an upward trend with double digit increase in recent years and is projected to reach 14 per cent in 2019, thus the higher medical claims,” he added.
Lim said the general insurance penetration rate in Malaysia (total premiums as a percentage of gross domestic product) is also low tracking at 1.23 per cent for 2018 compared to the global average of three per cent.
He said further liberation of motor tariff could be the answer to the general insurance business sustainability.
Further liberalisation will allow premiums to be priced according to the risk profile of motorists.
He said other efforts that could help sustain the general insurance business moving forward include 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 state level by zooming into the high accident-prone areas and collaborating with 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.
For medical, Lim said the insurance industry had set up a joint task force to study the cost drivers in medical inflation and would submit recommendations to the authorities to contain medical costs for the benefit of all stakeholders and the insuring public.
The industry recorded a drop of 1.4 per cent with gross direct premiums of RM8.92 billion year-on-year for the first six months of this year.
Motor insurance, the dominant class, was relatively flat with a marginal decline of 0.2 per cent at RM 4.18 billion.