KUALA LUMPUR, Aug 28 — Bank Negara Malaysia (BNM) has urged insurance players in the country to continue advancing local insurance solutions specifically tailored to meet the needs of Malaysian consumers.

Deputy governor Adnan Zaylani Mohamad Zahid said it is important for insurance companies to underwrite policies that not only cater to local demands but also address risks unique to the domestic environment, an approach that can reduce the need to source insurance products from abroad.

"This will help provide support to the ringgit by reducing demand for foreign currency. Moreover, the industry should prioritise investing in local assets within their portfolios to also support domestic investments.

"Together, through these focused efforts, we can further strengthen the resilience of the ringgit and foster sustainable economic growth,” he said in his keynote address at the launch of the LIAM Starter Pack Insurance Fund here today.

As expectations on the Life Insurance Association of Malaysia (LIAM) continue to grow with the evolution of the industry, Adnan Zaylani expressed confidence that the association will continually adapt and innovate to stay relevant.

At the same time, he urged the industry to continue its pursuit of narrowing the country’s protection gaps.

"On behalf of the central bank, I would also like to thank LIAM for the leadership role it has played, and for its support as we strive to build a more inclusive, competitive and efficient insurance sector,” he said.

He added that LIAM’s role has been central in driving the awareness and financial education initiatives on life insurance to promote greater financial resilience for individuals and households through many initiatives.

The initiatives include the establishment of the MyCoverage website, LIAM’s #bukanextra and #nofomo awareness campaigns and the collaborative efforts with the National Credit Counseling and Management Agency (AKPK) on the Jelajah Bijak Wang initiative.

"I’m pleased to note that the life insurance industry continues to show commendable growth. In 2023 the industry recorded a double-digit growth of 11.6 per cent in its new business premiums amounting to RM13.4 billion compared to RM12.0 billion in 2022,” he said.

Adnan Zaylani said this is driven largely by the strong performance in the take up of group and investment link products.

"This also shows acceptance of life insurance products not just as protection, but also for medical coverage and investment purposes.

"Malaysia’s life insurance penetration rate, as measured against the gross domestic product (GDP), is also relatively high at 3.7 per cent compared to 2.1 per cent for emerging Asian countries and the global average of 2.8 per cent,” he said.

Meanwhile, he said that amid the current global uncertainties, Malaysia’s economy remains resilient, with GDP projected to expand at the upper end of the 4.0-5.0 per cent range in 2024.

He also noted the ringgit’s significant appreciation against the US dollar, making it one of the region’s best performing currencies and further underscoring Malaysia’s economic strength.

"As we anticipate this positive trajectory to continue, it is crucial to build on this momentum by advancing structural reforms that will enhance our resilience, competitiveness and long-term growth prospects.

"This development puts the industry in a position to maintain its growth momentum, given the good growth prospects of the economy, the relatively stable inflation environment and the continuous efforts to raise the income levels of Malaysians,” he said.

Nevertheless, Adnan Zaylani said, significant protection gaps still exist in Malaysia, particularly among the vulnerable segments.

He said that Malaysia has a relatively high insurance penetration rate as measured against the GDP, but it has hovered between 40 per cent and 50 per cent when measured against total population.

"In addition, many Malaysians are still deemed to have an inadequate level of protection against life shocks, serious illnesses and death.

"The impacts from the unanticipated disruptions arising from the pandemic and climate-related disasters have also greatly amplified the need for financial protection, especially for the lower income earners who are more susceptible to external shocks,” he said.

Adnan Zaylani said these developments, coupled with the increased life expectancy of Malaysians now at 74.8 years, and the trajectory that Malaysia will be an aged nation by 2044 further underscore the untapped potential within the Malaysian insurance industry to close the protection gaps.

"We recognise that encouraging insurance uptake is not easy. Various factors come into play from both the demand and supply side, which are often interlinked,” he said.

To address these intertwining challenges, Adnan Zaylani said a multi-faceted approach is critical, of which focus should be channeled towards enhancing financial education, simplifying product offerings and cultivating continuous trust-building actions.

"Insurance and takaful operators should also adopt better cost management practices and leverage on technology for more innovative solutioning,” he said.

Adnan Zaylani said a concerted effort by all stakeholders in the system is key to enhance consumers’ accessibility and understanding of insurance, as well as promote the long-term sustainability of the industry.

"Within this context, we call upon the insurance industry to take greater ownership in overcoming these challenges. As a start, we see opportunities in the provision of affordable, entry level products to build long-term product understanding and loyalty.

"We also encourage insurers and takaful operators (ITOs) to build upon the foundational efforts that have been put in place. For instance, the Perlindungan Tenang Voucher Programme, which ended in 2022, has managed to increase awareness of the products,” he said.

He said that BNM would also encourage ITOs to explore innovations in new areas such as preventative health solutions and income replacement products, among others.

Additionally, he said, ITOs can venture into emerging target segments, for instance, gig workers, as there are opportunities to offer affordable protection to this group.

In doing so, Adnan Zaylani said, ITOs can leverage on the flexibilities granted under the Perlindungan Tenang micro insurance and micro takaful framework, which allows ITOs to better serve the target segments.

"Innovations such as the ability to combine or bundle Perlindungan Tenang products with other financial products, partnering with non-traditional agents such as e-wallet providers to distribute products and provision of value-added services are among the regulatory flexibilities under the framework.

"Insights from the 2022 joint BNM-industry demand-side survey should also be fully utilised to better identify protection needs and understand the behaviours of the target segments, to improve product development and distribution strategy,” he said. — Bernama