KUALA LUMPUR: Malaysia's general insurance industry is expecting flat growth in its business for the second half of 2015 (2H15), as an automotive sales slump hits the motor insurance sector.

The weak performance of motor insurance — the largest class of the general insurance business — is largely due to the present poor car sales and drop in the market value of used cars, said Malaysian Insurance Institute (MII) chief executive officer Datuk Syed Moheeb Syed Kamarulzaman.

Motor insurance makes up nearly half of the growth in the general insurance business, he added.

“If we compare the growth of the general insurance industry (in terms of new business premium collection) with that in the first half of last year, the growth for this year (1H15) has (already) halved,” he told reporters after the signing ceremony of a memorandum of agreement between MII with Omni View Sdn Bhd here yesterday, which was held on the sidelines of the General Insurance Agents Convention 2015.

Syed Moheeb expects 2H15 growth for the industry will be “very minimal or almost unlikely” as consumers hold back from buying insurance.

Although new car sales on a year-on-year basis are traditionally slower in the second half of the year, Syed Moheeb said this time consumers are being cautious and are holding back from buying new cars as the trade-in value for used cars has fallen.

“When the market value of (used) cars goes down, it will impact our premiums, and when new car sales slow down, it will also impact us,” he said, adding that these two segments are crucial, contributing to the growth of motor premiums year-on-year at between 48% and 52%.

He said motor insurance registered a much slower growth rate of 2.1% in 1H15 compared with 8.3% in the same period last year.

Fire insurance — the second largest class — saw a higher growth rate of 5% in 1H15 compared with 4.2% a year ago, he added.

This article first appeared in digitaledge Daily, on September 4, 2015.