Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim says the industry has yet to realise its potential, in part due to a lack of long-term commitment from domestic shareholders. (NSTP Pic by YAZIT RAZALI)

KUALA LUMPUR: Bank Negara Malaysia (BNM) has targetted the national insurance penetration rate to breach 75 per cent in 2020 from the current 56 per cent.

Governor Tan Sri Muhammad Ibrahim said it is even possible to exceed 100 per cent.

He was speaking after launching the Malaysian Insurance Summit 2017.

The insurance and takaful industry has grown at a healthy annual rate of 10.47 per cent in the 20 years prior to 2016, and the sector now accounts for 6 per cent of the Malaysian financial system assets. 

Insurance penetration - the ratio of life insurance policies and family takaful contracts to total population increased from 25.3 per cent in 1996 to 56 per cent in 2016. 

Muhammad, in his speech, was however concerned that despite liberalisation efforts,  insurance and takaful were not attractive enough to appeal to large segments of our population who are still devoid of any form of protection.

"From the perspective of the population that remain underserved, the existing business models are essentially broken."

Underinvestment in domestic talent and capacity is another key concern.

From another angle, the industry has yet to realise its potential, in part due to a lack of long-term commitment from domestic shareholders.  

He also talked about a renewed focus on protection needs especially for first-time buyers. 

BNM is partnering with the industry to roll out Perlindungan Tenang, a national branding and communication platform next month in Kuching. 

Perlindungan Tenang is intended to reach 8 million working-age Malaysians and over 700,000 micro enterprises that currently need insurance and takaful protection.

"The insurance and takaful sector needs to catch up, " he said, urging the industry to embrace digitalisation.

Today, online insurance distribution still accounts for less than 0.1 per cent of business volume. 

"A very poor achievement. With consumers already enjoying benefits of digitalisation in many other daily activities, consumers should expect better level of personalisation, responsiveness and reliability from their insurance and takaful experience. "

This includes shorter time-to-compensate for insurance claims.

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