Malaysia’s non-life market stable as tariff liberalisation boosts pricing flexibility

The industry’s growth will also be supported by rising demand for digital insurance products.

Malaysia’s non-life insurance sector will have a stable outlook, supported by regulatory efforts to raise insurance penetration and the gradual removal of tariffs in motor and fire insurance, according to AM Best.

In its latest Market Segment Outlook on Malaysia’s non-life insurance market, AM Best said the sector remains positioned for growth, even as Malaysia’s real GDP growth is expected to slow in the near term due to global economic pressures. 

Non-life insurance penetration remains in the low single digits, and Bank Negara Malaysia continues to push for wider insurance and takaful coverage.

The report said growth will also be supported by rising demand for digital insurance products and natural catastrophe cover. 

Premium rates are expected to increase due to high inflation and more frequent claims. AM Best added that tariff liberalisation is likely to encourage product innovation, improve service standards, and allow pricing to better reflect underlying risks.

Bank Negara Malaysia has been gradually liberalising motor and fire insurance tariffs since July 2016. 
According to AM Best, this phased approach gives insurers more pricing flexibility as the market shifts towards risk-based pricing. 

Whilst the move is expected to put pressure on pricing in the short to medium term, it is seen as supportive of the industry’s long-term sustainability.

The report also noted that ongoing regulatory measures aim to contain medical inflation and improve underwriting results in the health insurance segment. 

At the same time, higher climate-related risks, especially from severe floods, are leading to further regulatory action to strengthen insurers’ preparedness and risk management.