The General Insurance Association of Malaysia (PIAM), the umbrella body representing all insurers in the country, has released figures for 2016 and it does not make for good reading, whether from the insurers’ business point of view or as us motorists. First, the figures.
Growth in the insurance industry has tapered to just 1.1% in 2016, which is the lowest seen in many years. That’s half the 2.2% growth rate in 2015. Gross written premium income was RM17.67 billion last year.
At 46.2% of the pie, motor insurance is the biggest contributor to the business, and premiums stood at RM8.17 billion compared to RM8.09 billion in 2015, a growth of 0.8%. It is way ahead of fire insurance, the second largest class at 18.5%. How about medical and health insurance? Just 6.6% of the insurance business, even after a surge last year.
That tells us that the fortunes of the insurance industry is very much linked to the automotive industry, and flat growth in motor insurance can be directly linked to lacklustre car sales in 2016, which saw a decline in total industry volume for the first time after six consecutive years of growth. Total vehicle sales were 580,124 units last year, 13% lower than in 2015 and below the 600k mark for the first time since 2009.
Growth is marginal, but claims remain high. Motor insurance claims amounted to RM5.02 billion last year, which works out to RM13.8 million per day. While that’s 5% lower than in 2015 (RM5.29 billion), it remains a key concern for the industry. The claims include those paid out for property damage (own car, the other party’s car), bodily injury and death, and vehicle theft. PIAM bosses also pointed out that medical costs are on the rise, along with parts prices due to a weak ringgit.
According to statistics recently quoted by the Ministry of Transport, the total number of accidents recorded in 2016 was 521,466 cases, a 7% increase fro 489,606 cases in 2015. Total deaths from road accidents also jumped 7% from 6,706 in 2015 to 7,152 last year. Malaysia’s vehicle ownership ratio is among the highest in the world, and so is the accident rate. That’s a worrying trend.
PIAM says that claims costs have also been impacted by the Customs department’s directive to disallow the claiming of Input Tax Credit on repairs of accident vehicles.
The association has lodged repeated appeals to Customs on the basis that there’s is double taxation involved, as GST has already been paid on spare parts used for repairs. PIAM says that in addition to the workshop paying GST on parts, insurers have to absorb GST when they pay repairers for their costs of repairs, which includes the price of the parts.
There’s good news in the form of a big decline in vehicle theft. In his presentation, PIAM CEO Mark Lim pointed out that the police and customs have done a good job in crippling car theft gangs and syndicates, working together with the Vehicle Theft Reduction Council (VTREC), a multi-stakeholder organisation set up by PIAM. The number of reported stolen vehicles was down 20% to 19,307 units last year.
The insurance industry is currently working on two initiatives. The first is a Fraud Intelligence System (FIS) to combat insurance fraud, which is estimated to cause RM500 million in losses yearly, or 10% of motor portfolio incurred losses. It uses advanced data analytics to detect unusual patterns and will be deployed in phases, starting in the third quarter of 2017.
The other is the game changing Phased Liberalisation of the Motor and Fire Tariffs announced by Bank Negara in June last year. Together, the two insurance classes account for 65% of the insurance market, and detariffication will impact almost everyone – motorists, individuals with home loans, households and businesses. PIAM will work with BNM to ensure an orderly transition and the planned National Consumer Education Campaign will be vital. If all goes to plan, full liberalisation will happen in 2019.
On the industry’s prediction for 2017, PIAM chairman Antony Lee said that it “should be no worse than 2016”.
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Motor insurance premium 8.17 billion while motor claims amount to RM5 billion.. The motor insurers collectively made a gross profit of RM3 billion. No?
Yes, That amount is True “if” U don’t have overhead expenses like commission for agents, brokers, administrations expenses, advertisement, salaries for your backroom staffs, rentals, electricity & ……
Yes. Insurance companies and their agents are the worst breed of scum in the world. The profit margins are just unbelievable. What service is an agent doing to deserve a percentage of premiums? I don’t buy insurance from agents, only direct from the company. Even still, no innovation, the same products they sell 20 years ago, still selling now. No value to the consumer whatsoever. See the product offerings in Europe and USA and you’ll realise how primitive our market is and how agents can earn millions of dollars selling nonsense.
When is the next coming hike on premiums?
Premium paid 8 bil, claims 5 bil. U still have almost 3 billion ringgit left. Let’s count how many zeroes are there. 3,000,000,000.00 that is a lot u know. More than 1MDB case of 2.6 bil.
However I must agree to your suggestion that liberalisation is needed. Similar to other develop countries.
Higher premiums are charged if the driver is young, boy instead of a girl, very low in experience, driving cars that are powerful and fast. Charge more if he or she drinks alcohol (refer to UK) and if he declared not to drink but during accident found drunk, insurance have the right not to pay out.
Also increase premiums if he or she has accident record in the same year.
Of course give discounts to cars with 5 star ncap rating, cars that are not popular among thieves or having good security system as standard.
Then proton drivers have to pay more already.
There are good news in the form of a big decline in vehicle theft. The police & customs have cripple car theft gangs & syndicates. The number of reported stolen vehicles was down 20% to 19,307 units last year. For this alone, we should thank these officers for doing a Good job. Bravo.
biggest con job in the world. insurance. we are forced to buy it but it does not cover a lot of things. and motorcycle accident no payouts for us.
Of course it is a lucrative business.
Furthermore, I can foresee once the autonomous car driving start hitting on the road, the car insurance industry will die slowly.
We already knew that Perodua and Vios contributed that highest figure
More consumers are being squeezed by the insurance companies….while the govt is utterly useless….