The general insurance industry recorded a 7.3% year-on-year increase in gross direct written premiums to MYR10.5 billion ($2.24 billion) in the first half of 2023, according to the General Insurance Association of Malaysia (PIAM).
Despite the positive trend, underwriting profit fell by 37.8% to MYR0.5 billion. This decline was largely due to a decline in profitability in the motor and fire lines of business. Specifically, the Motor portfolio loss worsened by MYR0.2 billion compared to the same period last year, due to a weaker Motor claims experience, which was closer to pre-COVID pandemic levels, and rising automotive parts prices in Malaysia. At the same time, the overall profitability of the Fire portfolio was adversely affected by various flood events and rising reinsurance costs.
Motor and Fire continue to dominate
Motor remains the largest line of business, accounting for 44% of total premiums. Despite a commendable 8% growth in gross direct premiums to MYR4.6 billion in 1H2023, Motor recorded an underwriting loss of MYR54 million, with the net claims ratio deteriorating to 67.1%, returning to pre-pandemic levels.
Meanwhile, Fire recorded an 8% increase in premium to MYR2.11 billion in 1H2023 compared to 1H2022. This increase was partly due to the increase in residential and commercial construction activities coupled with increased demand for flood cover. The Fire portfolio experienced a decline in profit with the underwriting margin narrowing to 26.8%. This decrease is attributed to inflationary factors, rate adjustments, intense competition in the sector and increased flood events.
Increase in flood insurance take-up
In 2022, flood events in Malaysia caused total losses of MYR622.4m, equivalent to 0.03% of the country’s nominal GDP.
Similarly, in 2021, the 1-in-100-year flood event caused significant economic losses of MYR6.1 billion, equivalent to 0.4% of Malaysia’s nominal GDP. These flood-related events had a negative impact on the overall loss volume and profitability of the fire lines of business.
However, following the increase in flood events, there has been a positive upward trend in policyholder awareness of flood cover. This is reflected in the increasing take-up of optional flood cover in motor and fire policies. The take-up rate (measured as the proportion of policies counted with flood cover) increased by 2% in both the motor and fire portfolios to 14% and 33% respectively.
Daily claims payout at MYR23m per day in 1H2023
The general insurance industry paid out nearly MYR23m in total claims per day. The average daily claims payout in 1H2023 increased by 23% compared to the full year 2022.
Over the past decade (2013-2022), the daily motor claims payout accounted for the majority of the total claims, averaging MYR16m daily, or 70% of the total payout. In 2022, there was a reversal of the trend observed since 2020, with Motor daily claims payout increasing to MYR13m per day. Subsequently, in 1H2023, Motor daily claims payouts increased to almost MYR16m per day, the highest even compared to the pre-pandemic period.
