Kuala Lumpur, 22 November 2023 – The general insurance industry has recorded an increase in gross direct premiums of 7.3% to RM10.5 billion for first half of 2023 compared to the corresponding period in the previous year. Despite the positive trajectory, the underwriting profit had experienced a contraction of 37.8%, settling at RM0.5 billion. This decline is largely due to contraction in profitability for Motor and Fire lines of business. Specifically, the loss for Motor portfolio deteriorated by RM0.2 billion as compared to same period last year, due to deterioration of Motor Claim experience closer to pre-pandemic level and rising prices of vehicle spare parts in Malaysia [1]. On the other hand, the overall profitability for Fire portfolio has been adversely impacted by various flood events [2] and rising reinsurance costs [3].
Motor and Fire lines of business continue to dominate as top premium contributors
Motor retains its position as the largest line of business at 44% share of the total premium. Despite a commendable 8% growth in gross direct premiums, reaching RM4.6 billion in the First Half of 2023, Motor insurance recorded an underwriting loss of RM54 million with net claims incurred ratio deteriorating to 67.1%, reverting towards pre-pandemic levels.
Meanwhile, the Fire line of business recorded an 8% increase in premium in the First Half of 2023, totalling to RM2.11billion compared to the First Half of 2022. This increase is partly due to the rise in residential and commercial construction activities, coupled with an increasing demand in flood coverage [4], the Fire portfolio experienced a decline in profit with the underwriting margin contracting to 26.8%. This decline is attributed to inflationary factors, tariff adjustments, intense competition in the sector along with increased flood events [5]
The Marine Aviation and Transit (MAT) classes of insurance, accounting for a 9% share of the total premium, recorded a deceleration in year-on-year premium growth, setting at 3.5% in the First Half of 2023 as compared to 7.2% in the First Half of 2022. Subsequently, the premiums for Miscellaneous classes of insurance, constituting a 16% share of the total premium displayed an upwards trend with a robust year-on-year premium growth of 15.6% in the First Half of 2023. The significant growth shown in Construction All Risk (CAR) & Engineering business premiums was driven by the thriving construction sector, supported by the acceleration of major infrastructure projects post-pandemic [6].
In contrast, the Personal Accident (PA) line of business, constitutes a 6% share of the total premium, witnessed a significant drop in premium by 15.5% year-on-year. This regression aligns with levels consistent with prior years (pre-pandemic) largely due to the ending of Perlindungan Tenang Voucher (PTV) Program. Additionally, a potential continuous upward trend in the loss ratio for Travel PA may be observed beyond 2023, which is mainly driven by the resumption of travel after a period of significant reduction in travel and the commensurate surge in flight cancellation and delays due to staffing shortages for the airline companies in some regions [7].
Medical and Health Insurance (MHI) demonstrated a significant increase in year-on-year premium growth at 15.2% in the First Half of 2023, despite a smaller margin at 23.5% lower year-on-year.
General insurance conventional overall premium
Increase in flood insurance take-up rate following rising flood events
In 2022, flood events in Malaysia had caused overall losses of RM622.4 million, which translated to 0.03% of the country’s nominal GDP [8]. The breakdown of losses are summarised as follows:
- Public Assets and Infrastructure: RM232.7 million (37.4%)
- Living Quarters: RM157.4 million (25.3%)
- Agriculture: RM154.5 million (24.8%)
- Business Premises (majority in service sectors): RM50.3 million (8.1%)
- Vehicles: RM18.8 million (3.0%)
- Manufacturing: RM8.7 million (1.4%)
Similarly in 2021, the “1-in-100 year” major flood event incurred substantial economic losses of RM6.1 billion, equivalent to 0.4% of Malaysia’s nominal GDP. These flood-related events had adversely affected the overall claims volume and profitability of the Fire lines of business.
Nevertheless, following the rising flood events, there has been a positive upward trend in policyholders’ awareness regarding flood coverage. This is reflected in the increasing take up rate for flood optional coverage within the Motor and Fire policies. The take up rate (as measured by the proportion of policies count with flood coverage) has increased by 2% for both Motor and Fire portfolios, to 14% and 33% respectively.
Daily claims payout at RM23 million per day in 1H2023
The general insurance industry settled close to RM23 million daily on total insurance claims. The average daily claims payout in the First Half of 2023 has increased by 23% from full year 2022. Over the past decade (2013-2022), Motor daily claims payout represented the majority of total claims averaging at RM16 million per day, constituting to 70% of total payout. In 2022, there was a reversal in trend observed since 2020, with Motor daily claims payout increasing to RM13 million per day. Subsequently in 1H2023, Motor daily claims payout increased to nearly RM16 million per day, highest even comparing to pre-pandemic period.
[1]. Malay Mail, “Report: Prices of car spare parts up between 25pc and 60pc” (https://www.malaymail.com/news/malaysia/2022/08/15/report-prices-of-car-spare-parts-up-between-25pc-and-60pc/22851#:~:text=Malaysia%20Automotive%20Prosper%20Entrepreneurs%20Association,10%20and%2015%20per%20cent), 15/8/2022.
[2]. Insurance Asia News – “Claims pile up from Malaysia flood losses as unseasonal rains continue” (https://insuranceasianews.com/insured-losses-from-johor-floods-tens-of-millions/ ), 15/3/2023; [3] Swiss Re by Email, 27/10/2023
[3] Asia Insurance Review, “Malaysia:Reinsurance renewals indicate signs of hardening”, https://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/84167/type/eDaily/Malaysia-Reinsurance-renewals-indicate-signs-of-hardening, 5/4/2023.
[4]. GlobalData (https://www.globaldata.com/media/insurance/malaysia-general-insurance-industry-reach-6-6-billion-2027-forecasts-globaldata/), 25/4/2023.
[5]. Insurance Asia News, “Claims pile up from Malaysia flood losses as unseasonal rains continue” (https://insuranceasianews.com/insured-losses-from-johor-floods-tens-of-millions/ ), 15/3/2023.
[6]. New Straits Times, “Budget 2023: Infrastructure projects to be accelerated this year, says PM” (https://www.nst.com.my/news/nation/2023/02/883220/budget-2023-infrastructure-projects-be-accelerated-year-says-pm), 24/2/2023.
[7]. CBS NEWS, “Flight delays, cancellations could continue for a decade amid airline workforce shortage” (https://www.cbsnews.com/news/the-future-of-flying-more-delays-more-cancellations-more-chaos/), 25/7/2023.
[8]. Laporan Khas Impak Banjir di Malaysia 2022, Jabatan Perangkaan Malaysia
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Media Relations Contact:
Ms. Susanna G. Simon
Manager, Consumer Education, PR & Corporate Communications
Persatuan Insurans Am Malaysia (PIAM)
Tel : +603-2274 7399
Fax : +603-2274 5910
E-mail : susanna@piam.org.my
