This article first appeared in Digital Edge, The Edge Malaysia Weekly on May 8, 2023 - May 14, 2023

Insurance penetration in Malaysia is relatively low compared with other developing countries, with significant gaps in coverage, particularly in the areas of health and life insurance.

The traditional insurance structure has resulted in 90% of the population being underinsured. In 2020, more than 85% of small and medium enterprises (SMEs) also had inadequate coverage, leaving them exposed to business interruption and property damage, says Ernst & Young.

Mandates to address critical protection gaps, holders of digital insurance and takaful operator (Dito) licences might be the answer to Malaysia’s worrying insurance protection gap. Bank Negara Malaysia, the regulatory body overseeing the issuance of the licences, requires applicants to demonstrate meaningful value propositions that will contribute to long-term social and economic factors. This will be achieved by driving the following outcomes: inclusion, competition and efficiency.

Commissions are the main cost that drives up the price of life insurance policies. Thus, agents spend more time targeting the affluent market, leaving those in remote areas vulnerable. This is where smaller insurtech companies are at an advantage as they can circumvent this issue by utilising technology to distribute insurance tailored for the underserved.

There are four lines of businesses covered by the Dito licences, namely life insurance, family takaful, general insurance and general takaful. Malaysia Fintech Map 2022 states that there are 32 insurtech companies currently in the country. Thus, there are a variety of options for users to choose from.

Given the fact that customers find insurance terminology and information difficult to understand, many are often in a bind when choosing the right insurance product that provides sufficient coverage. Here are some tips to help you select the right insurance product.

Technological advancements through the likes of analytics, artificial intelligence (AI) and cloud computing allow users to experience a seamless experience in a customer’s insurance journey. This means an easier onboarding experience for customers or less number crunching when performing risk analysis for users. It could also provide back-end support to users through customer support via the use of chatbots.

That being said, users who are looking to navigate and choose a life insurance product that is tricky to understand will appreciate the human touch. Incumbent insurers, with their bricks-and-mortar facilities and availability of agents, allow users to directly engage and gather the information they require without having to do the legwork themselves.

With the multitude of mobile apps available, users can go through the insurance products available before selecting the one most appropriate for them.

Disseminating simple products to the public is made simpler through digital platforms. These products offer protection against specific events without being intertwined with complex saving or investment features.

For instance, utility-based and on-demand pay-per-use products provide smaller coverage for various events, including critical illness, snatch-theft injuries and outdoor activities.

Without the need to hire or pay commissions to agents, digital insurers can keep costs low. This is in addition to not having bricks-and-mortar establishments. Therefore, insurance products can be offered at more competitive prices.

All in all, customers should be mindful of the type of insurance coverage they truly require.

To choose the right product, they need to be aware of the type of insurance they need, the adequacy of their existing insurance coverage and the options for an affordable plan.

The four lines of insurance customers can choose from are life insurance, family takaful, general insurance and general takaful. Therefore, users need to be certain of the type of insurance they need to protect themselves.

Life insurance simply means the insurer pays a sum to a designated beneficiary upon the death of the insured person. Family takaful offers coverage for personal accidents, injuries and disabilities caused by accidents while general takaful provides coverage for the loss and damage of assets.

General insurance or non-life insurance covers policies related to the health, home and motor vehicle of the insured person. This includes hospitalisation and surgery, theft and fire.

Customers should constantly keep abreast of the latest insurance products as well as their general satisfaction with their current plan. For instance, claims have been a pain point for some users. With mobile apps, users can do it directly without having to go through a middleman.

Furthermore, before committing to an insurance plan, users should understand what is covered by their policies. Never hesitate to enquire further if you have any difficulty understanding what you are signing up for.

Other factors such as the coverage provided should also be kept in mind. The chosen insurance product must provide sufficient protection in the event of a loss.

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