Great potential for insurance industry to grow, says Prudential

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Philip Seah

KUCHING: Prudential Assurance Malaysia Bhd (Prudential) believes there is plenty of room for Malaysian insurers to grow at the present in spite of the many challenges the industry face.

With a penetration rate of only 56 per cent, chief executive officer Philip Seah said there is still a large segment of the population that remains uninsured.

“One of the challenges that the industry will continue to face and will need to address is to increase consumers’ awareness and understanding in insurance or financial planning matters,” he told The Borneo Post.

“Consumers need to be educated constantly so they are able to make an informed decision of their purchase. A greater awareness level and better understanding of the financial solutions available will in turn help improve the market penetration rate for both conventional life insurance and takaful sectors.”

The upcoming Goods and Services Tax (GST) also played a role towards creating uncertainty in the market next year, Seah said.

“In view of GST next year, there is still uncertainty as to how it will be implemented in the industry.

“The government has announced the exemption of life insurance (death coverage and total and permanent disability insurance) though many popular riders like medical, personal accident and critical illness will be subjected to GST.

“Amidst the uncertainty, the priority will be to ensure that GST is implemented as seamlessly as possible come April 2015.

“Educating the distribution channels and customers/policyholders on the impact of GST to their policies will be equally important as well.

“On-going education and awareness will play a critical role in ensuring the successful implementation of GST.”

This comes back to Prudential’s mission which runs parallel with the country’s aspiration to ensure that 75 per cent of the population is insured by 2020.

“We introduced PRUlink million in a bid to close the protection gap of Malaysians,” he explained. “What prompted us to create PRUlink million was the fact that Malaysians in general do not have sufficient insurance coverage.

“Currently the combined life insurance penetration rate for Malaysia is 56 per cent (conventional and takaful) which means that only half of the population in this country has some form of life insurance.

“Besides, Malaysians are also very much underinsured. The general rule of thumb is to insure a sum equivalent to 10 times your annual salary. With Malaysia’s gross income per capita of RM32,000, the current average sum assured of RM50,000 is far below the ideal amount one should be insured for.”

In terms of opportunities, Seah higlighted the Bumiputera market as a key focus for the insurance and takaful industry going forward as it remains underdeveloped at the moment.

“In order for this sector to grow, insurers will have to work hard to expand the Bumi agency force and develop products that can cater to the needs of this particular market segment.”