KUALA LUMPUR, March 23 — Malaysia’s insurance and takaful industry is expected to roll out the development of an insurance starter pack, nationally, for low-income earners, and further develop alternative distribution channels to increase the insurance penetration rate in the country.
In the Financial Stability and Payments Report 2016 released today, Bank Negara Malaysia said the country’s overall insurance penetration remained flat within the range of 54 per cent to 56 per cent over the last five years.
“Affordability and access remain key barriers to higher levels of penetration,” it said.
To address the issue, the report said various innitiatives were introduced, including the requirements for life insurers and family takaful operators to make basic protection products available through direct distribution channels beginning from 2017.
It also noted that among lower income groups, only four per cent of households currently have some form of life insurance or family takaful cover.
“Focus has mainly been directed at lowering distribution costs and simplifying product design and delivery, while ensuring meaningful protection for policyholders,” it said.
It also said that surrender payments over the past four years have increased above the long-term historical average level, raising concerns over sales practices.
“Escalating healthcare costs have also contributed to more frequent repricing activity for medical and health insurance/ takaful products which can increase difficulties faced by policyholders to maintain their policies,” it said.
Hence, it said BNM would continue to take firm action to ensure fair practices by insurers and takaful operators, including requirements for firms to take specific steps to better manage policyholders’ expectations.
“This includes the shift to use plain language policies to help consumers better understand the benefits, exclusions and obligations under insurance and takaful policies.
“By end-2017, more than three quarters of the insurance and takaful policies for personal lines of business are expected to be simplified using plain language,” it added. — Bernama