In just a few weeks, I’ll – hopefully – be hiking up a foreign hillside with my family on a well-deserved holiday. Naturally, I’ve prepared the standard checklist: clothes for six days, two credit cards, cash in a money belt, and something 65.2% of Malaysians tend not to take along on their holidays: travel insurance.
A 2021 online survey showed that only 24.8% of Malaysians buy travel insurance, with 40% snatching it up at the last minute. Digging deeper, the European Union-Asean Business Council revealed that Malaysia’s overall insurance penetration is a measly 5.3% of GDP, trailing the global average of 7%.
I mean, think about it. You pay a small fee for insurance, and if disaster strikes, you’re covered with a much larger sum. Just by spending RM70, you can get two weeks of travel insurance in the United States, along with RM150,000 in medical coverage in case you slip on a loose pebble or something. And f you are willing to pay up to RM300, that coverage goes unlimited.
Sure, some folks consider insurance a gamble against bad luck. But I don’t like to think of it as a lottery ticket. It’s more like the airbag in your car: you hope you’ll never need it, but when you do, you’re grateful it’s there.
Is this a concept that Malay-sians struggle with? Well, interestingly, things might be shifting due to recent events. According to the owner of an insurtech company I spoke to, the Covid-19 pandemic has made people more aware of risks and the importance of having funds handy when the unexpected happens. (“Insurtech” refers to using technology to find cost savings and efficiency when buying insurance.)
“Those who can afford to adequately insure themselves will have done so already, having realised its value during the pandemic,” he noted.
But, he adds, “The issue of the protection gap is far more complex than simply raising awareness and education; it is also a matter of accessibility.”
He’s got a point. We’re seeing how digitalisation has made insurance more available. Investment in insurtech has grown from US$1bil in 2004 to US$7.2bil in 2019 to US$14.6bil in 2021 (RM4.6bil to RM33.4bil to RM67.6bil at today’s exchange rates). An overwhelming proportion of these insurtech companies focus on marketing and distribution of insurance. So while in 2010, I could “purchase” my travel insurance over the phone, I still had to drive over, clutching photocopies of my IC and passport, to finalise everything. Now? A couple of clicks and I’m set.
There’s a difference, though, between being able to buy insurance and actually doing so.
I had previously written about how 74% of Malaysian homeowners had zero flood insurance and had to rely on government aid costing up to RM100mil during the Selangor floods in late 2021 (“Rising waters bring many black swans”, The Star, Jan 2, 2022; online at bit.ly/star_insure).
In another instalment of Contradictheory, I highlighted that between 2017 and 2021, farmers claimed compensation from the Agricultural Disaster Fund for damages totalling RM150.4mil due to floods and droughts (“As the planet heats up, Malaysia needs to look beyond rice for food security”, The Star, Nov 21, 2021; online at bit.ly/star_rice).
If these homeowners and farmers had insurance, the government wouldn’t have to be their financial safety net. But, hey, who wouldn’t opt for free aid instead of paying premiums in advance for something that might never happen, right?
Odd as it sounds, maybe the way to make Malaysians embrace insurance is by practically forcing us to do so. Every car owner is required to have auto insurance, after all. That insurtech company I mentioned even partnered with food delivery companies to provide free medical and life insurance to delivery riders, who are automatically opted-in.
And what happens if it’s not compulsory? When the government gave Malaysians the opportunity to withdraw money from their Employees Provident Fund savings during the pandemic, 8.1 million Malaysians took advantage of it, but until last month, 3.1 million of them have not been able to rebuild their savings. It’s easy to take money out, and not easy to put it back in again.
That being said, I’d also argue that it’s worthwhile to encourage people to voluntarily build up their insurance and risk management portfolios through education rather than just slapping them with mandatory contributions.
A financial services company specialising in insurtech I know of is now using artificial intelligence to craft hyper-personalised policies tailored to individual lifestyles. The company has an app for companies that helps employees access their company’s benefits, including medical, travel, and financial insurance products. What’s more, it rewards employees for staying healthy and active (after all, healthy employees are less likely to file claims).
To be honest, my original goal for this piece was to discuss risk assessment and management. But as I delved into research, I realised just how complex this issue can be. So let me put it this way: When you’re on a holiday that’s already costing you a small fortune, isn’t it worth shelling out a few extra hundred ringgit for that worry-free, “what-if” peace of mind?
In his fortnightly column, Contradictheory, mathematician-turned-scriptwriter Dzof Azmi explores the theory that logic is the antithesis of emotion but people need both to make sense of life’s vagaries and contradictions. Write to Dzof at lifestyle@thestar.com.my. The views expressed here are entirely the writer's own.
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