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The Malaysian motor insurance market is set to grow at a compound annual growth rate (CAGR) of 7.5% from MYR10.6 billion ($2.3 billion) in 2024 to MYR14.2 billion ($3.1 billion) in 2028, in terms of gross written premiums, forecasts GlobalData, a leading data and analytics company.
GlobalData’s Insurance Database reveals that motor insurance is expected to account for over 45% share of the Malaysian general insurance industry in 2024. It is expected to grow by 8.8% in 2024, driven by growing vehicle sales and a rise in premium prices for motor insurance policies.
Swetansha Chauhan, Insurance Analyst at GlobalData, comments: “Malaysian motor insurance industry growth peaked in 2022, driven by economic recovery and favorable regulatory developments that have led to an increase in vehicle sales. The high demand for vehicles has aided motor insurance growth in 2023, a trend that is expected to continue in 2024.”
According to the Malaysian Automotive Association (MAA), total vehicle sales increased by 12.5% to reach 799,731 units in 2023 as compared to the previous year. This growth was supported by a backlog of bookings from the sales tax exemption period that ended in March 2023. As per the exemption, a 100% sales tax waiver was provided on locally assembled vehicles and a 50% waiver on imported vehicles purchased from June 15, 2020, to March 31, 2023.
Chauhan adds: “Rising premium prices will also support motor insurance growth. The prices for automobiles have increased over the last couple of years due to excess demand and global economic volatility, which has led to an increase in premiums for motor insurance policies.”
Additionally, starting from March 1, 2024, the Malaysian government raised the service tax on motor insurance policies from 6% to 8%, leading to an increase in overall cost for policyholders. Labor charges associated with repairs and maintenance will be subject to the higher tax rate, which will also lead to a rise in premium rates.
Along with a growth in premiums, there was an increase in claims in 2023, which has returned to pre-pandemic levels. According to the General Insurance Association of Malaysia (PIAM), the loss ratio for motor insurance grew by 1.4 percentage points to reach 66.7% in 2023 due to an increase in accident rates.
The Traffic Investigation and Enforcement Department in Malaysia recorded a 9.7% increase in traffic accident cases to 598,635 in 2023 from 545,588 cases in 2022. Furthermore, the number of fatalities increased by 104% to 2,417 fatalities in 2023 from 1,183 fatalities in 2022.
Consequently, the average motor insurance claims paid per day increased to RM 15.1 million in 2023 from RM 13.0 million in 2022, marking the highest increase in the past five years.
The phased liberalization of motor insurance pricing, initiated by the government in 2016, permitted insurers to adjust premiums based on consumers’ driving behavior. Phase 2B of this initiative, implemented from July 1, 2023, allows for premium adjustments of up to 20%, an increase from the previous limit of 15%. People with good driving behavior will benefit from higher premium reductions, thereby lowering their insurance costs, while those with poor driving behavior may face increased premiums.
Chauhan continues: “This will prompt insurers to launch more personalized products that will make motor insurance more affordable for people with good driving behavior while also encouraging safe driving.”
Insurers are also investing in disruptive technologies to gain a competitive edge and reduce costs. From underwriting to risk analysis, digitalization has taken over many insurance processes to improve operational efficiency. Artificial Intelligence (AI) algorithms coupled with machine learning (ML) models are making underwriting an efficient and accurate process. AI/ML-enabled tools also help in identifying frauds and irregularities in the claim process. This is helping insurers in improving the overall product offering.
Chauhan concludes: “The Malaysian motor insurance industry is expected to maintain upward growth for the next five years, driven by an increase in vehicle sales and rising premiums. However, insurers’ profitability is expected to remain challenged over the next few years due to increasing claims and rising inflation.”
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