The General Insurance Association of Malaysia (PIAM) reported that the general insurance industry grew by 2.3% to MYR9.07 billion (US$2.2 billion) in gross written premiums from January to June 2015 compared with the same period last year. PIAM highlighted that this half yearly growth rate was at a slower pace compared to the 6.4% achieved for the first half of 2014 over 2013.
The Association attributed the lower growth rate to a challenging business and operating environment. Contributing factors include a cautious outlook and a moderation in consumer spending as a result of the heightened economic uncertainties coupled with the rising cost of living which mainly affected the motor class being the dominant line of business overall.
Motor slows; fire sees higher growth
Motor Insurance registered a much slower growth rate of 2.1% for the half year compared to 8.3% for the same period last year. Fire Insurance the second largest class saw a higher growth rate of 5% compared to 4.2% last year. The other strong performing lines include Marine, Aviation and Transit (MAT) and Personal Accident with impressive growth rates of 6.1% and 7.4% respectively surpassing their 2014 growth of 0.4% and 4%.
Liabilities insurance declined by 4.9% over the period compared to a 10.5% growth last year while Medical and Health decreased by 6.8% owing to a technical reclassification by a member company of its portfolio from General Insurance to Life Insurance.
With regard to the financial performance, the industry turned in a higher underwriting profit of MYR754 million (US$185 mln) compared to MYR637 million for the same period last year, with the industry’s loss ratio improving to 56.7% from 58.4% during the first half of 2014.
Reduction of motor vehicle theft cases
Highlighting the critical issues faced by the industry, PIAM Chairman Chua Seck Guan said: “Top line premium growth for the dominant Motor sector slowed considerably while the industry continued to bear the heavy burden of increased claims costs. Although there are encouraging signs of a slower rate of increase in motor claims costs, the industry has to remain vigilant and focus on its various initiatives and projects to better manage and contain claims cost.” For the first half of the year total motor claims climbed to MYR2.69 billion an increase of 3% over the same period last year. The corresponding increase was 11% during the first half of 2014 over 2013.
A positive development for the industry is the reduction in motor vehicle theft cases. In 2014 the number of vehicle theft cases for all classes reduced by 19% for the first time in many years. Based on latest estimates the number of vehicle theft has continued on the downward trend.
Moving forward, the industry will continue to focus on human capital and talent. This is to ensure a continuous and sustained flow in its talent pipeline which is critical to support the steady growth of the industry year after year.
Cautiously optimistic about 2H2015
While growth for the first half of 2015 has slowed, PIAM is cautiously optimistic that the second half will be better.
“Notwithstanding the headwinds and the challenging economic and uncertain operating environment, demand for insurance products and risk management solutions should remain steady driven largely by individual and business needs for better protection, and increasing awareness about insurance risks and benefits. And underpinning all these is the strong fundamentals of the Malaysian economy and the sound regulatory regime of its financial services system,” said PIAM.