While life insurance premiums and family takaful contributions have grown by 48% since 2010, the penetration rate has only increased by 5 percentage points. This indicates that the industry is increasingly concentrated on a narrow insurance segment. If we eliminate double-counting, only 35% of adults have some form of cover. For the rest, products are too complex and remain unaffordable. Existing distribution channels also fail to provide adequate access, especially outside urban centres. Technological advancements are not being used to the fullest. Even for the population segments that are being served, making a purchase or a claim is a process fraught with anxiety and headache. Increasing medical insurance premiums have also placed insurers under heightened public scrutiny, with questions raised on the suitability of product designs that offer little protection against escalating costs of healthcare. Insurers’ contracting arrangements with healthcare service providers have also been called into question. While insurers might not be the guilty party here, the response to the criticism has been slow and wanting. As a group, the insurance community is meek in safeguarding the sector’s image and reputation. Underinvestment in domestic talent and capacity is another key concern. Among a large number of foreign insurers, significant reliance on group level support has limited the investments in core functions needed to develop strong domestic capabilities. In addition, large amounts of payments are being made for management fees and outsourcing arrangements. Between 2014 and 2016, it is estimated that insurers in Malaysia made no less than RM1.3 billion of such payments to foreign affiliates.

In terms of the migration to e-payments, the insurance and takaful sector is a key sector where the usage of cheques is still prevalent. In 2016, 2.3 million cheques were issued by insurance and takaful companies while 9.8 million cheques were collected by such companies from their customers. While good progress has been made this year with the decline in cheque collection accelerating from -0.5% in 2016 to -22.1% in the first 7 months of 2017, more effective and creative measures are needed to drive cheque usage to negligible levels. To this end, Bank Negara Malaysia has recently concluded a consultation exercise with the industry on the implementation of an ePayment Incentive Fund Framework (ePIF). Under the framework, insurance companies shall set aside RM3 for every cheque issued and RM1 for every cheque collected to be used as incentives to encourage their customers, agents, service providers and government agencies to migrate to e-payments. The current practice where agents collect premiums from customers in cash and make payment to insurance and takaful companies using the agencies’ own cheques or credit cards should stop. The industry should promote greater prudence and transparency in the collection of customer premiums by facilitating customers to make direct payments to the insurance and takaful companies. To this end, the industry equipping agents with mobile point-of-sale (mPOS) or mobile apps to collect payment directly from customers should be the norm. Thirdly, the industry needs to collaborate and invest in key market infrastructure and arrangements.