A new report from Malaysian Reinsurance Berhad (Malaysian Re) has claimed that both customers and re/insurers will ultimately benefit from a more liberal market in Malaysia, following the recent de-tariffication of the dominant property classes, motor and fire.
Kuala Lumpur, Malaysia.
Of the 30 senior re/insurance executives surveyed by Malaysian Re, almost all held a very positive view of the long-term effects of de-tariffication.
In the short term, respondents felt that customers would be the main beneficiaries due to lower prices and more competitive products and services.
But in the medium-term, insurers are expect to benefit from improved risk segmentation and risk-based pricing.
And in the longer term, the move is expected to help Malaysian society more broadly as the industry becomes better capitalised and more competitive, while risk-based pricing will incentivise less risky behaviours in both the retail and commercial space.
“The de-tariffication of Malaysia’s motor and fire insurance strongly impacts the market-place,” said Henner Alms, Partner at Dr. Schanz, Alms & Company and co-author of the report.
“However, the liberalisation has slowed, but not disrupted the growth in both lines of business,” Alms explained. Over time, it is expected to result into improved risk management practices among insurers and a more risk-conscious behaviour of consumers.”
But despite the market’s liberalisation, insurance penetration in Malaysia has continued to stagnate, the report noted, particularly in the B40 segment, which is the lower-income part of the population.
A majority of respondents felt that Takaful could have a natural role to play in providing cover to the B40 segment, as General Takaful outperformed the overall market in terms of growth and technical profitability over the past few years.
Although it already accounts for 13.7 % of overall gross direct premiums and contributions, most executives said there is far more potential for Takaful in Malaysia.
Malaysian Re suggested that technology could also have a role to play in promoting wider Takaful penetration, as Takaful operators typically rely less on the agent network than their conventional counterparts.
Most of the survey responses agreed that the relevance of digital ecosystems in the Malaysian reinsurance market would rise over time, but they also felt that the longer-term potential would be limited to low premium and affordable products.
The dominance of agency distribution in this market means insurers are often wary of channel conflicts, the report said, and are inclined to play it safe by maintaining or digitising the status quo.
To most of the executives polled by Malaysian Re, insurtech is primarily seen as an operating expense, although some benefits were highlighted in terms of distribution efficiency and new business generation.
