PIAM has released half-year results for the General Insurance Market in Malaysia and the numbers do not look good. In summary, the General Insurance Premium grew by 3%. This is less than the forecasted inflation rate of 3.4% (Source: Malaysia Inflation Rate) in the next 12 months, so that the market actually shrunk by 0.4%. Motor business grew only by 0.7%, which basically means that motor premium stayed flat and no economic growth has been seen. If you minus inflation that means in actual fact, less motor insurance was sold than in the half-year before. General Motor business remains to be tough, especially with the Motor Detariffication starting.
On the upside, Fire insurance grew by a strong 8.9%. We need to look into the numbers further to better understand why there is a strong increase in Fire insurance. One explanation could be the strong increase in Housing Prices (Source: Malaysia House Price Index) in Q4 2015 that continues to extend into H1 2016. If house prices increase, so do the premiums for Property Insurance. Another boost comes from foreign investors and the weak Ringgit. If the Malaysian Ringgit is low, foreign investors with strong USD or Yen can afford to spend more on property in Malaysia which will increase the Housing Prices.
Both Motor and Fire insurance are in the plan to be Detariffed or how BNM put it now Liberalized in a “phased” manner. With motor insurance premium going down and fire insurance premium going up, one strategy for general insurance business can be to balance their portfolio more towards Fire insurance. This is nothing new, because insurance companies for years have pushed agents to “Balance” their portfolio towards non-motor business, because motor business is unprofitable for many companies. Knowing is easier then done. With little indication that the half-year trend will change, insurance agents with motor insurance focus need to think quickly on how to maintain their business income during Detarffication.
Check out our Detariffication Estimator to find out how much of your general insurance business will be at risk next year, when Detariffication is started for Comprehensive and TPFT policies.
If you want to read another opinion on the half year results, check out Asian Insurance Review: Malaysia: General insurers pay “staggering” motor claims in 1H