The outlook of the financial services industry, especially in the insurance sector, is positive as Malaysia’s rising population and rising disposable income will result in more and more people requiring financial services.
Lee Khee Chuan, SFP practice manager and licensed financial adviser
KUCHING: As key players in Malaysia’s finance industry, insurance companies see the urge to push for growth amongst competitors which include banks, Real Estate Investment Trust (REIT) managers, unit trust and investment fund providers and the like.
In a previous edition of BizHive Weekly in October last year, it was outlined that Malaysia’s insurance industry was poised for further growth, harbouring massive potential due to its under penetration in the country.
After Bank Negara Malaysia announced the Financial Sector Blueprint 2011-2020 in December, the industry is further tapped for more growth via product diversification, expanding into Islamic insurance (takaful) as well as mergers and acquisitions.
To date, the outlook of the financial services industry is very positive as Malaysia’s rising population and rising disposable income will result in more and more people requiring financial services.
Currently, the insurance industry’s penetration rate is only 42.8 per cent, which is low compared with markets such as Singapore of Taiwan.
Meanwhile, Malaysia’s economy is growing, and the Malaysian population is relatively young.
As such, the industry still has space for more push, particularly with instigation from the Financial Sector Blueprint.
Providing better products
Insurance companies in Malaysia are able to live up to several recommendations listed under the Blueprint, such as providing higher value-added medical and health insurances.
GREAT POTENTIAL: The nation’s insurance industry is poise for further growth harbouring massive potential due to under penetration.
However, Standard Financial Planner Sdn Bhd (SFP) practice manager and licensed financial adviser rep Lee Khee Chuan forewarned that this would ultimately boil down to individual insurance providers.
“This will boil down to the extent that top management of the insurers are willing to shift their paradigm,” he told BizHive Weekly. “Some insurers seem to have the attitude of ‘we know best’ and are not sensitive to what the market wants.
“By opening up the industry to more competition, including the new channels like financial adviser (FA) companies, industry players will be forced to respond and introduce more value-added products,” he added.
“However, the unhealthy situation of excessive medical claims suffered by the insurers must be controlled to help insurers manage their claims costs.”
With the new financial sector blueprint in place, Lee expected to see more mergers and acquisitions among the insurance companies, especially the general insurance companies, as Bank Negara Malaysia is keen to beef up the local insurers in face of competition from foreign players.
MACRO LEVEL: Lee says at the macro level the industry will continue to grow as a mobiliser of long term savings to support domestic economic growth.
When asked on his opinion, iFAST Capital Sdn Bhd (iFAST Capital) specialist Khor Jay Ee was a firm believer that a greater collaboration amongst regional players would enhance the insurance industry in general.
“This is simply because such collaboration would ultimately result in better products and services for end-users,” he outlined in an email to BizHive Weekly.
“We are always welcoming competition among Malaysian players because we believe that it is healthy and encourages companies to innovative more efficient and more effective ways to do business.
“Those who are unable to keep up will get weeded out. The ultimate beneficiary is still the same – the end-user, which is the client,” he added.