Recent Trend, Problem, Challenge, Opportunity (Malaysia Insurance Industry)
Recent Trend
According to a chief executive of a national reinsurer, the Malaysian insurance industry’s consolidation trend is expected to continue. The Sun Daily also announced that the Malaysian insurance industry’s detoxification does not fuel the current consolidation trend. Instead, it is driven by the joined impacts of regulations and market opportunities seized by more prominent organizations. As indicated by Malaysian Reinsurance Bhd (Malaysian Re) president and CEO Zainudin Ishak, the nation’s insurance market is presently steady. “In terms of size of v
general insurance companies, Malaysia is situated second after Singapore in ASEAN with an estimation of US$161 million, comprising of 21 insurance companies with four takaful suppliers(Olano, 2019).
Apart from that, a recent trend in Malaysia, which is the end game envisioned by the Malaysian insurance sector, will be achieved in three stages. The first stage comprises of building the capacities of domestic insurers. During this stage, insurers will be given more permission in terms of operational and board adaptability to create and optimize abilities, scale, and innovation. Suggestions show that the deregulatory helps quantify external parts of business exercises that will support innovations in the market, permitting insurers access to a more extensive product range, empowering them to leverage on dissemination channels, and promoting increased degrees of rivalry inside the local market. The second stage promotes consolidations and reinforces incentives for improved performance. Under this stage, purposeful measures will be taken to build up establishments essential to support a market discipline in supplementing the insurance industry’s regulations and management. The second stage will be focused on strengthening the financial resilience of insurers and upgrading the buyer’s insurance. The proposals under this stage will most likely result in local industry consolidations. The third stage incorporates stimulating innovation through progressive liberalization. With the essential establishments set up, measures will be taken under the third stage to dynamically change the insurance segment. By doing so, Malaysian customers will be given more prominent access to world-class products.
Problem
The significant problem confronting the insurance business going ahead is its increasing rivalry from conventional players due to the increasing consolidation and specialization trends worldwide. Rivalry from new players such as assets directors, captive insurers (general insurance), independent financial counsels, and web players who are improving item variety and performance, reducing costs, promoting innovation, have changed how business is directed, addressing the necessities of progressively advanced and progressively educated customers. Therefore, few solutions must be implemented to resolve these issues. Massive changes must be made to raise execution principles in the Malaysian insurance industry to match worldwide standards and raise the performance of Malaysian insurers (Malaysia, n.d.). In light of these difficulties, the Malaysian insurance industry, individually the domestic insurer, uncovers that Malaysia’s insurance industry needs to advance toward global benchmarks in terms of proficiency, adequacy, and dependability. In this unique circumstance, size and aptitudes have been distinguished as crucial drivers of higher noteworthy productivity, adequacy efficiency, effectiveness, and stability. Moreover, there is an increasing need to quicken the pace of improvement as the global insurance industry is getting progressively focused, specific, and disintermediated.
More specifically, domestic players in the life and general insurance company ought to improve further in terms of economies of scale and areas of management, data innovation, and underwriting. Fair competition could substantially decrease borrowing costs, particularly in life coverage, and premiums charged by general insurance. Furthermore, distribution channels such as an independent financial counselor, banks, phone, regular postal mail, and the web should be evolved, and measures should be taken to improve the organization’s profitability and quality. Meanwhile, the variety of insurance products accessible in the market should be extended. A few components of regulations, essential before, would now be adjusted to support the local insurance industry for faster improvement while animating execution improvement (Malaysia, n.d.). Regulations have been active at putting domestic insurers on a sound balance, with costs declining, commissions leveled out, and stable proportions. Moreover, the increasing connections between the insurance industry and the banking sector should be managed. As insurers, asset managers, and banks become increasingly connected, and banks and insurers start to exploit the functionality of bancassurance, and multi-item individual personal financial counselors, the guideline and oversight over the segments
must be adjusted adequately.
Challenge
It is human nature to look for different contents and forms of risk management, which form the purpose of insurance. The insurance industry has constant growth and developing rate. The challenges are both the causes and outcomes of a series of direct and indirect factors. The challenges are common and unique simultaneously, dependent on time, geographic territory, social and economic improvement level, elements, observations objects, objectives, and intentions, social and economic yield. Here are some challenges faced by the majority of insurance companies in Malaysia. The first challenge will be cyber risk. The cost of safeguarding the security of a firm’s network is certainly not a child’s play. Insurers need to continually examine and study on cyber fraud, strengthening their frameworks to remain resilient. Insurance corporations need to work together in utilizing inheritance frameworks that have shifting degrees to their security. The second challenge would be a high level of insurance technology, as insurers attempt to meet new customers’ needs while improving central insurance functions.
A few of the issues are such as the expense of keeping up a significant insurance innovation level, which has sparked intense rivalry among market players. Insurance companies are currently searching for approaches to utilize and incorporate innovation into their business development framework (Insurance, 2020). Artificial intelligence is increasingly incorporated in the insurance business process, improving productivity and automating business operations like client-facing, underwriting, and claims processes. Furthermore, trust issues have become increasingly challenging for the insurance industry, which is one significant reason why numerous people, despite the benefits that an insurance policy offer, are still reluctant to spend on it. Many corrupt insurance firms neglect to pay claims to their clients. Few even attribute insurance plans as a financial burden. Numerous insurance firms have closed down due to financial difficulties. Policyholders who are the victims of the loss will think twice before repurchasing insurance policies in their life, arising from the financial constraint the loss has brought on them. The final challenge will be economic instability. A nation’s economic uncertainty will have adverse effects on all insurance companies, which may increase the premiums rate obliged towards clients and interest rates on credit facilities provided by financial institutions. No client will want to pay for an excessive insurance plan, regardless of whether it is expressed clearly in the agreement structure that the insurance rates may change from time to time.
Opportunity
Subsequently, companies can start by utilizing primary information correctly. As technology improves, a firm’s competitor will have the same advantages and opportunities as them. Failure to utilize vast information to increase the firm’s competitive edge, the firm will have trouble keeping up with its competitors. PWC noted that technology developments make it simpler to associate with the web while providing the ability to break down a massive volume of information with convenience. According to PWC, knowledge of this data will assist the firm in stimulating its underwriting and pricing. Besides that, a firm has to evaluate the cyber risk they are facing critically. By understanding and scrutinizing the nature of cyber risk, the firm will be more prepared for future challenges. People may need insurance to cover their losses when they are affected by data breaches. Nonetheless, companies will need to be protected against other extravagant factors. If their information is leaked, they will need to take care of a few risks related to the data breach (Seo, 2020). These risks incorporate reporting authorities, informing people, settlement costs, fines, costs of finding the reason, loss of business, loss of clients, loss of reputation, and cyber theft.
Besides, insurance companies should always stay ahead of the challenge by concentrating on the objectives that they have set to sustain their growth. Understanding the challenges ahead for the following year prepares a firm for accomplishment, which is similarly portrayed when customers purchase an insurance policy. Another opportunity would be the comprehension of insuring people in an on-demand nature (Seo, 2020). On-demand technology is not only the video service that we used to stream at home or rideshare service. Insurers must be ever ready to meet any unexpected occasions and demands from insureds. Numerous unanswered insurance issues are left unanswered in an on-demand economy, and insurers should prepare to respond to those inquiries by making arrangements to manage these spontaneous cases as they arise. Initially, each case may require different considerations. Eventually, as experience increases, the company will have the necessary resources to manage similar cases.