This article first appeared in The Edge Financial Daily, on January 18, 2016.

KUALA LUMPUR: MSIG Insurance (M) Bhd expects the Malaysian insurance industry to remain dampened in 2016, amid the less-than-rosy economic outlook for the country as crude oil continued to slump — it dipped below US$30 (RM132.60) last Friday — and forecast that the industry’s growth would stay flat at 3%, the same quantum it projected for 2015.

MSIG chief executive officer Chua Seck Guan told The Edge Financial Daily the industry’s growth will be dragged by sectors like personal insurance, such as motor, and residential property, due to persistently low consumer sentiment.

“The outlook for the industry in 2016 is more or less the same as 2015, unless we see a recovery in the currency — which is very weak now — [coupled with] a recovery in commodity prices and the global economy.

“However, the insurance industry is resilient. We will still see growth, as the government continues to stimulate the economy through infrastructure spending and their ability to attract foreign direct investment,” said Chua, who is also chairman of the General Insurance Association of Malaysia.

He added that the weaker currency, together with the implementation of the goods and services tax (GST) last year, had caused consumers to delay their purchase of big-ticket items, such as cars and properties, which are some of the main drivers of growth in the insurance industry.

Motor insurance accounts for close to half the insurance market, so the growth of motor insurance will remain stagnant if sales are not as good as previous years, explained Chua.

Last Thursday, Frost & Sullivan forecast that Malaysia’s total new vehicle sales in the country — measured by total industry volume (TIV) — may fall 1.44% to 648,000 units from 2015, due to the impact of economic pressures, a weak ringgit and general price increases. It is also expected that the TIV for 2015 will come in 1.3% lower at 657,000 units.

Demand for property and/or fire insurance has also been affected by a slowdown in property purchases,  due to tighter lending policies that form part of the government’s cooling measures for the property sector, observed Chua.

But it’s not all doom and gloom. MSIG still sees potential to grow in the healthcare insurance class, driven by growing awareness of and demand for healthcare in the country, said Chua, adding that one of the company’s expansion strategies going forward is growing its healthcare class.

“Our strategy will be to get our clients to review their sum insured of their insurance,” he said. The company will also introduce new product classes to meet consumer demands.

“We can’t depend solely on the external market. We need to develop products that meet consumers’ needs. Recently, we marketed one new product named Prime Personal Accident (Prime PA).

“Within four months, we were able to generate RM1.7 million in premium. Hopefully, we can churn out products as successful as the Prime PA this year,” said Chua.

MSIG will be introducing five new product classes in 2016, but Chua declined to go into details of the planned products.

The company is also targeting to step up sales of its terrorism insurance, as a regular fire insurance policy does not usually cover damage caused by acts of terrorism, unless the consumer requests for a coverage extension for just such an inclusion, he said.

Cybersecurity coverage is also on the agenda. “We’d like to acquire the skills for the cybersecurity class. We don’t have this right now; it’s very new. But more and more cyberattacks and data leakage have been occurring. The threat is real,” said Chua.

Despite its various plans for 2016, the company sees challenges in terms of growth, which is also partly due to the GST, he said, like the inability to claim input tax credit paid for motor repairs.

“Being unable to claim back the input tax credit will definitely impact the insurance segment as a whole, but it’s still too early to tell [what will be] the extent of the impact,” Chua said.

Further, increased merger and acquisition costs, due to intense competition for market share ahead of the detariffication that is expected to come on stream in mid-2016, have also squeezed margins.

Detarrification is the removal of pricing regulations in an industry, set forth by tariffs created by a regulatory body. Detariffing allows the industry to price its goods or services at market value, as regulation is discontinued to promote market equilibrium.

Regardless, MSIG hopes to better its performance through better underwriting discipline and higher operational efficiency, said Chua.