Gross premiums for general insurance industry decline 0.8% in 2019

PETALING JAYA: The general insurance industry registered a decline of 0.8% in 2019 with total gross direct premiums of RM17.41 billion, according to the General Insurance Association of Malaysia (PIAM), as it anticipates the general insurance industry will continue to stagnate for 2020.

Motor remained the largest class with a market share of 48.3% in 2019, followed by fire at 19.3%.

Motor insurance recorded gross direct premiums of RM8.42 billion with a drop of 0.4%. This is despite an increase in total new vehicle sales in 2019. The local automotive industry recorded 604,287 units of total vehicle sales in 2019 compared to 598,598 units in 2018.

Motor insurance have been registering underwriting losses for more than 10 years. Average premium per policy has been on a downward trend since 2016 while overall costs of vehicle repairs have risen owing to increases in motor spare part prices amongst other factors.

In 2019, an underwriting loss of RM335 million was recorded with RM5.48 billion being paid out in motor claims. On a daily basis, this amounts to RM15 million per day paid out by motor insurers for property damage, bodily injury and vehicle theft.

A major factor is the high accident and fatalities nationwide. Statistics shows that Malaysia has one of the highest road accident and fatality rates in the region.

PIAM chairman Antony Lee said in the pricing of motor insurance premiums, it is important to reward the good risks and charge the bad drivers more. This means that a driver who is in a class that is more likely to experience road accidents should pay a higher insurance premium compared to a good driver with a clean record.

“PIAM is currently in discussion with the regulator Bank Negara Malaysia on the next phase of the motor tariff liberalisation to adopt a more equitable approach through the use of risk-based pricing models. There will be incentives for safe drivers with accident-free records,” Lee said in a statement.

In this way, PIAM hopes that the high risk drivers will be motivated to effect a change in their driving behaviour to enjoy the benefit of a lower insurance premium. The industry eagerly anticipates further liberalisation and look forward to the eventual opening up of the market.

Meanwhile, the number of stolen vehicles continued its downward trend in 2019 declining 21% from 13,581 to 10,729 vehicles for all classes. Since 2014, lesser vehicles have been stolen year on year.

Fire insurance grew 1.1% and maintained its position as the second largest class with gross direct premiums of RM3.37 billion. Marine aviation and transit insurance surged 5.3% with gross direct premiums of RM1.35 billion owing to a recovery in the offshore oil related sector. The miscellaneous class recorded a drop of 2.9% with gross direct premiums at RM2.08 billion.

Medical and health insurance declined 11.4% to RM 1.02 billion while personal accident insurance dipped 1.3% to RM 1.19 billion.

Medical claims have been on the rise owing to inflation and a host of other reasons. Malaysia has one of the highest medical inflation rates in Asean in the recent years. The expected increase in medical claims for 2019 was 13%.

A joint industry task force has been set up to better understand and address medical inflation. The critical issue for insurers and consumers is price transparency so that consumers can make informed choices on the cost of treatment.

Looking ahead, PIAM foresees that the Malaysian economy will experience weaker growth having recorded the lowest level of growth in the Q4 2019 at 3.6% since Q3 2009. Challenges in the operating and business climate remain. The current Covid-19 crisis will compound the situation further with a significant dampening impact.