KUALA LUMPUR: The motor insurance sector continued its losing streak in 2014 with underwriting losses of RM163 million — even though there was an improvement of 11.41% from the loss of RM184 million reported in 2013 — according to the General Insurance Association of Malaysia (PIAM).

During 2014, the industry paid out RM5.04 billion in motor insurance claims, representing a staggering RM13.8 million paid out daily as compensation for bodily injuries and property damage caused by road accidents and vehicle theft.

According to PIAM’s convenor and motor deputy chairman Kong Shu Yin, the general insurance industry is focusing on reducing motor insurance claims by inculcating road safety and good driving habits among motorists.

“The accident rate and the vehicle theft rate in the country are still high so these are areas we still need to focus on. The industry also plans to implement a fraud intelligence system to combat the high incidence of fraudulent and inflated claims in the market,” he told a news conference after launching the association’s new logo yesterday.

He said some rebalancing of motor insurance premiums is required as there are a lot of subsidies within various types of motor insurance. “This is in the pipeline as we are still waiting for [guidelines from] Bank Negara Malaysia on this; the rebalancing of motor insurance premiums is in line with the liberalisation of the insurance industry by 2016.” 

He added that in a liberalised market, risk-based pricing [of insurance policies] would apply, whereby policy holders with higher risk profiles can expect to pay higher premiums.

“For example, a dangerous driver with a poor safety record will have to pay more in terms of motor vehicle insurance premiums ... in a liberalised market, we can expect the claim payout ratio to hover around 60% to 70% for motor insurance [as opposed to 71.5% in 2014],” said Kong.

On whether the liberalisation of the industry would leave room for smaller industry players, PIAM chairman Chua Seck Guan gave assurance that liberalisation is not just about scale.

“There are many ways that smaller underwriters can develop their own pricing strategies to stay afloat — it all comes down to how they prepare themselves, [in terms of insurance premium pricing] when the industry becomes liberalised,” said Chua.

Overall, the general insurance industry raked in underwriting profit of RM1.49 billion in 2014, which is 2.05% higher than RM1.46 billion recorded in 2013, with the fire insurance segment contributing profit of RM700 million, medical and health insurance contributing RM120 million, and the marine, aviation and transit insurance sector contributing RM165 million.

In terms of gross premiums, the general insurance industry raked in RM17.09 billion in gross written premiums in 2014, which was 5.9% higher than RM16.15 billion in 2013.

Of this, the health and medical insurance sector grew by 9.4%, while the motor insurance sector grew by 5.4%. 

On whether the 5.9% gross premium growth last year can be sustained this year, Chua said the growth is pegged to gross domestic product (GDP).

“The GDP for the country in 2015 is forecast between 4.5% and 5.5%, thus we anticipate a growth of gross premiums of 5.5% to 6% in 2015, despite the impending GST,” he said, adding that the impact of the GST would only be felt by individual policyholders as corporate consumers are already subject to service tax.

This article first appeared in The Edge Financial Daily, on February 10, 2015.