Significant protection gaps still exist in Malaysia, particularly among the vulnerable segments of the population, and a multi-faceted approach is critical to narrow them, with the insurance sector taking on greater ownership, according to Mr Adnan Zaylani Mohamad Zahid, deputy governor of Bank Negara Malaysia (BNM).
Speaking at an event organised by the Life Insurance Association of Malaysia (LIAM) which is marking the 50th anniversary this year of its founding in 1974, Mr Adnan Zaylani notes that while Malaysia has a relatively high insurance penetration rate measured against the GDP, the rate hovers between 40%-50% when measured against total population. This means approximately only two out of five Malaysians have life protection. In addition, many Malaysians are still deemed to have inadequate levels of protection against life shocks, serious illnesses, and death.
The impacts from the unanticipated disruptions arising from the pandemic and climate-related disasters have also greatly amplified the need for financial protection, especially for the lower income earners who are more susceptible to external shocks. These developments, coupled with the increased life expectancy of Malaysians now at 74.8 years in 2023, and the trajectory that Malaysia will be an aged nation by 2044, further underscores the untapped potential within the Malaysian insurance industry to close the protection gaps. The gap exists despite the growth of the life insurance industry.
Greater ownership
Mr Adnan Zaylani said that to address the intertwining challenges, a multi-faceted approach is critical. He called on the insurance industry to take greater ownership in overcoming these challenges.
He said, “As a start, we see opportunity in the provision of affordable, entry-level products to build long-term product understanding and loyalty. We also encourage ITOs to build upon the foundational efforts that have been put in place. For instance, the Perlindungan Tenang Voucher (PTV) programme which ended in 2022, has managed to increase awareness of Perlindungan Tenang products with more than 780,000 Perlindungan Tenang products purchased voluntarily as at end-2023. This is actually an eight-fold increase compared to the collective take-up between 2017 and 2020.”
The PTV programme is a financial aid scheme implemented by the government to help lower-income groups subscribe to insurance plans.
Innovation
The deputy governor also said, “While we have seen innovations in Perlindungan Tenang’s product offerings and distribution channels as well as efforts to explore public-private partnerships in recent years, there are still areas to improve. We would encourage ITOs to explore innovations in new areas such as preventative health solutions, and income-replacement products, amongst others. Additionally, ITOs can also venture into emerging target segments, for instance, gig workers, which comprise 17% of the current workforce, as there are opportunities to offer affordable protection to this group.”
ITOs can leverage the flexibilities granted under the Perlindungan Tenang micro insurance and micro takaful framework, which allows ITOs to better serve the target segments, he pointed out.
The industry should also capitalise on the appeal of social media to reach a broader set of consumers, he said.