90 Per Cent Of Life-Insured Malaysians Under-Insured, Says LIAM

Up to 90 per cent of the life-insured Malaysians are under-insured, which could result in inadequate protection to the family members, says Life Insurance Association of Malaysia (LIAM) Industry Promotion Committee Chairman Ramzi Toubassy.

“In 2015, about 50 per cent (around 12.5 million) of Malaysia’s population had life insurance coverage protection but 90 per cent of them were under-insured, which means their insurance coverage may be only at one or two times of their annual income,” he said.

“When something bad happens to them, the money that they can spend on their family probably will only last for a year or two,” Toubassy told Bernama.

The amount, he added, was far below the life insurance industry’s rule of thumb, in that, an individual especially the breadwinner, is suggested to have life insurance coverage which equals 10 times his annual income.

With higher sum assured protection, it could at least guarantee the family’s livelihood for the next 10 years, he said.

Despite the high ratio of under-insured population in the country, Toubassy, however, remains optimistic that Malaysia can achieve the target of having 75 per cent of its population to be insured by 2020.

“Yes, absolutely. We can achieve the target because the insurance penetration in the country only reached 50 per cent in 2015,” he said.

Besides, he believes the growing number of insurance agents and intermediaries selling life insurance in the country, were large enough to approach a wider number of people to purchase policies.

“In 2014, we had 85,000 insurance agents and 20,000 intermediaries who are selling life insurance in the country and Malaysians, over the next few years, would soon be able to purchase insurance policies via the Internet.

“The more you increase the way you approach people, obviously the penetration rate will increase,” he said.

Meanwhile, on the insurance-related knowledge among Malaysians, Toubassy admitted that being a developing country, Malaysians’ knowledge of life insurance did not match their counterparts in matured markets of Australia, the United States, the United Kingdom, Singapore or Hong Kong.

For example, he said, clients in the matured countries understood what life insurance was and knew what to ask and what to expect from their agents.

“Here, we are almost there.. Maybe we are 10 years away from them. But I am sure by 2020, Malaysia is going to start to be a matured market in terms of life insurance industry,” he said.

Apart from educating people to increase their awareness on the importance of insurance protection, Toubassy believed tax-exempt life insurance policies would be one of the efforts to encourage more Malaysians to have their life protected.

“In the United States, if you buy a life insurance policy, and you put money within the cash value inside the policy, it is all tax-deferred unless you take the money out,” he said.

Hence, he said LIAM would continue to work closely with regulators until they achieve what the matured market have today.

“Because this (life insurance policy) is not an income, it is an emergency sum that is paid to ensure the family’s livelihood is protected.

“Otherwise, the family will become the burden of the Malaysia’s economy,” he said.

LIAM has been calling for a separate tax relief for the Employees Provident Fund (EPF) contributions and tax deduction for life insurance premiums as currently only a RM6,000 tax relief on combined EPF and life insurance premiums, are given to the people.

Asked if the current economic situation would hinder Malaysians, especially the younger generation such as fresh graduates from purchasing life insurance, Toubassy said “there is never an easy time to buy any insurance”.

“There is no specific time where the market is going to hinder the sales of life insurance,” he said.

Instead, he suggested that people buy life insurance protection when they were young and healthy.

“The younger you are, the healthier you are, the premium will be cheaper to afford,” he added.

Malaysia’s life insurance industry recorded a 6.2 per cent growth in insurance coverage to RM1.24 trillion in 2015 versus RM1.17 trillion in 2014 and the industry is expected to achieve a moderate single digit growth this year.

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