GAN Leong Hin (pic) assumed the position of Prudential Assurance Malaysia Bhd (PAMB) chief executive officer (CEO) in November 2015. He joined PAMB in 2013 as chief financial officer and had led initiatives including the formulation and execution of PAMB’s strategic vision to drive growth and strengthen its capabilities as a leading life insurer.
Gan is an actuary who has more than 26 years of experience in the life insurance and investment businesses in Asia, Australia and the UK. He shares with StarBiz the trends and outlook for the industry in Malaysia.
What is the current insurance penetration rate in Malaysia?
Thirty years ago, only one in 10 Malaysians had a life insurance policy. Fast forward to today and that number stands at 3.5 for 10 Malaysians.
This is worrying, as the life insurance penetration rate has not risen by much in 30 years. Furthermore, many of the insured are underinsured. This is a concern and challenge that has been facing the industry for many years.
What is the insurance outlook for Malaysia for the rest of the year?
Generally positive as opportunities for the insurance sector continue to exist. Strong demand for life insurance and wealth-management products continues to be underpinned by positive long-term structural trends in Malaysia. These include the low insurance market penetration rate, a fast-rising working-class population, high out-of-pocket healthcare spend as well as improved life expectancy.
The insurance sector is one of the most important growth drivers of the financial services sector. With the constant change in regulations, system and its sub-segments, how is this changing the insurance landscape?
We view the changes and trends as opportunities, as they continue to fuel the need for life insurance protection. I alluded to the structural trends leading to strong demand for life insurance products above, but there is also a segment of Malaysians who are unable to afford financial protection.
This fact is even more pronounced against the backdrop of rising healthcare costs, goods and services becoming more expensive and uncertain public-sector safety nets.
In response to this, Bank Negara, together with the insurance industry, introduced in November 2017 an affordable insurance scheme called “Perlindungan Tenang”. Riding on the three basic criteria of affordability, accessibility and simplicity, the objective of the scheme is to offer affordable insurance/takaful coverage to meet the financial protection needs of the bottom 40% households.
We recognise that some communities cannot afford insurance altogether. That’s why we introduced PRUkasih – a fully sponsored annual protection plan that provides temporary financial relief to urban low-income households to help them cope with a sudden loss of income due to illness, accidents or death, with the condition that the registrants must be employed.
Besides covering housing expenditures and food needs, PRUkasih also provides affected families with money for funeral expenses in the event that the family breadwinner passes away.
Malaysia offers an attractive mix of demographics and strong economic growth and has become a base for the development of takaful and syariah-compliant insurance. What are your thoughts on the opportunities and risks for insurance?
There is rising urbanisation and a growing working population in Malaysia. A 2015 Migration Survey by the Department of Statistics showed that a total of 709,000 people nationwide relocated during the years 2014 and 2015. Of this number, 80.9% migrated to urban areas.
According to the World Bank, the urban population in Malaysia was reported at 75.37% in 2016 and urbanisation is expected to rise to 76.6% by 2022.
This means better education and better income prospects, all of which increase the propensity to save and protect.
There is an ageing population and pressure on the dependency ratio too. Based on UN Population Projections, Malaysia will become an ageing society by 2020 with 7% of the population aged 65 years or older.
This figure is expected to double to 14% in the next 20 years. The current total dependency ratio of Malaysia is about 44%, which means that there is one dependent for every two working adults. With fewer children to support the older generation, the need for life and healthcare cover will increase.
There is also a worrying protection gap. In Malaysia, out-of-pocket (OOP) healthcare spending accounts for about 36% of total spending, which is very high compared with most Organisation for Economic Co-operation and Development (OECD) countries. OOP spending on health is considered a suboptimal way to finance healthcare, as it increases the financial risk for individuals.
Malaysia is also grappling with low insurance penetration rates. Although one-third of Malaysia’s population have life coverage, as much as 90% are considered to be underinsured, according to a study by the Life Insurance Association of Malaysia.
If measured as the value of premiums relative to gross domestic product, the penetration rate amounts to 3.1%, compared with an OECD average of around 5%.
What are the trends that are affecting the insurance industry?
The demand for healthcare services is expected to rise in tandem with growing urbanisation, an ageing population and the increasing prevalence of non-communicable diseases.
While health insurance is expected to grow three-fold by 2020 to about RM16.5bil, 20%-30% of the target population does not have any form of health insurance.
Some of the trends that are taking place include increasing inflation of 12%-14% for healthcare costs, and more people seeking treatment amid the rising cost of medication.
With these trends, there has been an increasing focus on managing the costs and providing more affordable healthcare by the insurance industry, regulators and government.
Do you think the digital revolution has delivered technologies that can deliver dramatic business improvements for insurance companies?
We view technology as an enabler to further enhance or innovate our business processes, productivity and customer experiences. Prudential is investing around £300mil annually in technology across the Asian region over the next three years as we further digitise our business across the entire customer life cycle.
We are one of the most modern companies in the insurance sector in Asia. Prudential has been leveraging on digital technology since 2004, when we rolled out our e-submission solution across our markets.
In Malaysia, we’ve streamlined our claims submission process and equipped our agents with a needs-based interactive app to make planning for life goals accessible for their customers, while providing them with a new and innovative way to provide consultation with increased efficiency.
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