Insurance and takaful products are still not attractive to large segments of the population of Malaysia as many of them are too complex and unaffordable, said Bank Negara Malaysia’s (BNM) Governor, Tan Sri Muhammad Ibrahim.
He said the industry should concentrate on the underserved segment to allow them to be protected by at least one coverage.
“At the moment our penetration rate is about 56 per cent. In the developed economies it is more than 100 per cent.
“The government has targeted 75 per cent penetration by 2020 but eventually we want to go for more than 100 per cent,” he told reporters on the sidelines of the 7th Malaysian Insurance Summit here today.
Earlier, in his keynote address , Muhammad said, from the perspective of the population that remained underserved, the existing business models were essentially broken.
While life insurance premiums and family takaful contributions had grown by 48 per cent since 2010, the penetration rate has only increased by five percentage points indicating that the industry was increasingly concentrated on a narrow insurance segment, he said.
“If we eliminate double-counting, only 35 per cent of adults have some forms of coverage,” he said.
Furthermore, he said, even for the population that was being served, making a purchase or a claim was a process fraught with anxiety and headache.
BNM Governor said to address the gap issue, products and delivery channels needed to be diversified to better suit the whole population, adding that this must entailed a renewed focus on protection needs, especially for first-time buyers.
On this, Muhammad said, the central bank was partnering with the industry to roll out Perlindungan Tenang, a national branding and communication platform next month in Kuching.
“Perlindungan Tenang is intended to reach eight million working-age Malaysians and over 700,000 micro enterprises that currently need insurance and takaful protection against key risks,” he said.
The products, which would carry the Perlindungan Tenang logo, needed to meet the three criteria of being Affordable, Accessible and Easy to understand.
“The products are aimed to address ‘pain points’ that commonly held consumers back from purchasing insurance and takaful products.
“To-date, four insurers and two takaful operators had developed products that would be introduced under this initiative and BNM expected more would come on board,” he said.
On other developments, the governor urged the industry to embrace digitalisation to revolutionise the customer experience whereby the insurance and takaful sectors needed to catch up.
He said to-date online insurance distribution still accounted for under 0.1 per cent of business volume, which was a poor achievement as consumers already enjoyed the benefits of digitalisation in many other daily activities.