Kuala Lumpur, 27 February 2014: Inadequate insurance coverage even for people who have purchased life insurance was one of the findings that were uncovered in a study commissioned by LIAM recently.

 

In announcing the results of a research study undertaken by Universiti Kebangsaan Malaysia on the “Protection gap or Underinsurance gap in Malaysia”, it stated that Malaysians should be aware that financial protection is also as important as accumulating savings.

 

“This protection gap study is part of the industry’s effort to fulfil the national aspiration of ensuring that 75% of the population is insured. Currently, the combined insurance and takaful penetration of 56% is still relatively low compared to other developed countries, “said Mr Vincent Kwo.

 

Professor Dr. Zaidi Isa, in his presentation during the results announcement reflected that the findings of their study suggested that many Malaysian households are substantially underinsured. The average protection gap for families whose primary wage earner do not have life insurance protection is RM723,000 per family.

 

What this fact means is that, when there is a death to the wage earner of the family, and in order for the family to sustain their current lifestyle and continue with their daily consumption, they would need a sum of around RM723,000 to last them for at least 5 years.

 

“The average mortality gap for each member of a family was between RM100,000 to RM150,000. This is the average amount that a person needs to sustain his spending/lifestyle for the next 5years upon the death of the breadwinner of the household, he said.

 

The study also shows that the per capital spending on life insurance in Malaysia was RM850 or USD330 in 2012. This figure is lower than the world average of USD 373 and much lower than other Asian developed countries such as Singapore (USD2472), Hong Kong (USD 4025), South Korea (USD 1578) and Japan (USD 4143). These indicators reflect that the life insurance market in Malaysia is substantially under-penetrated.

 

“Although there is still a lot for the life insurance industry to do, we are pleased to report that many families have benefited from their life insurance policies. In 2013, the life insurance industry paid out a total of RM6.9 billion for death, disability, medical and cash bonuses. This is 3.7% higher than RM6.7 billion paid out in 2012. In addition, RM8.6 billion was paid in maturity amount and cash surrender values in 2013, which is 14.2% higher than the corresponding figure of RM7.5 billion in 2012,” added Mr Kwo.

 

It has been identified that some of the core reasons for the slow take up of life insurance is the lack of understanding of its benefits. This fact combines with a lack of awareness of life insurance especially in sub urban and rural areas have contributed to the low insurance penetration rate. A lot of people are under the impression that you could only buy life insurance when you can afford it. In fact, this is a misconception. Life insurance companies in Malaysia have various insurance plans to reach out to the needs of the underserved markets and the low income earners.

 

With LIAM celebrating its 40th Anniversary this year, many activities have been planned to raise the awareness of life insurance among Malaysians. Every member company of LIAM are also doing their part; bringing the message of life insurance to the rakyat from all walks of life, in support of the national agenda of fostering financial inclusion to all.

 

Click here for the full report.
 

About the “2012/2013 Protection Gap Study in Malaysia”
 

The Life Insurance Association of Malaysia (LIAM) has collaborated with the Universiti Kebangsaan Malaysia (UKM) in 2013 to carry out the Protection Gap in Malaysia. UKM were represented by Prof. Dr. Zaidi lsa from the Faculty of Science and Technology, Dr. Hendon Redzuan and Puan Rubayah Yakob from Faculty of Economic and Business.
 

UKM analyse the data provided by all LIAM member companies in order to examine the extent of underinsurance among Malaysian policyholders and the general population. This Study also aimed to obtain a benchmark of useful insights for the industry in order to formulate new strategies to reduce the protection gap and to increase the penetration rate in Malaysia as outlined in the Economic Transformation Programme launched in 2010. The study focused on protection, medical and critical illness policies and covered samples from the 25 to 65 age groups.
 

By 2020, Malaysia intends to increase its life insurance penetration to 4 percent of GDP or 75 percent of the population.

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