The Malaysian motor insurance industry is forecast to grow at a compound annual growth rate (CAGR) of 8.6% over 2023–27, from MYR9.7 billion ($2.2 billion) in 2023 to MYR13.4 billion ($3.0 billion) in 2027, in terms of direct written premiums (DWP), according to GlobalData, a leading data, and analytics company.

According to GlobalData’s Insurance Database, the motor insurance industry recorded an annual growth of 9.2% in 2022 after declining for three consecutive years from 2019–21.

The recovery in 2022 was supported by an increase in vehicle sales, which grew by 41.6% in 2022 compared to a decline of 3.9% in 2021, as per the Malaysian Automotive Association (MAA).

Prasanth Katam, Insurance Analyst at GlobalData, comments: “The Malaysian motor insurance industry is forecast to record an annual growth of 7.6% in 2023, driven by the economic recovery and government initiatives to increase sales of vehicles. Malaysia’s economy is expected to grow by 4.0% in 2023 and 4.4% in 2024, which will continue to have a positive impact on the sale of motor vehicles. ”

In June 2020, the government launched the National Economic Recovery Plan ‘Pelan Jana Semula Ekonomi Negara (PENJANA) to provide 100% sales tax exemption on the purchase of locally assembled vehicles and a 50% exemption on imported vehicles. The tax exemption was effective until June 2022, however, the registration period for the purchase of vehicles was further extended to March 2023 owing to a shortage of semiconductors. According to MAA, year to date sales volume for May 2023 grew by 12.3% as compared to the same period last year.

Katam adds: “Despite a growth in premiums, insurers in Malaysia will need to evaluate their risk exposure due to an increase in accident claims, increased frequency of natural calamities and rising inflation, which has significantly increased the cost of repairs.”

In 2022, the number of paid claims increased by 22.5% as compared to the previous year due to an increasing number of road accidents and natural calamities. As per the Ministry of Transport, more than 545,588 road accidents took place in 2022. Furthermore, the value of paid claims increased to MYR5.0 billion ($1.1 billion) in 2022 from MYR4.1 billion ($988 million) in 2021 due to an increase in the cost of claims.

Katam continues: “To mitigate the impact of increasing claims and reduce fraudulent claims, Malaysian insurers are adopting technologies, such as telematics and artificial intelligence (AI). AI is helping insurers to identify fake accident claims or claims that are inflated.”

Insurers in Malaysia are also offering telematics-based insurance products where discounts are provided to customers based on their driving behavior. This promotes healthy driving behavior and will help offset the impact of increasing premium rates on customers.

Katam concludes: “Increase in vehicle sales, government incentives, and rising premium prices are expected to support motor insurance premium growth in Malaysia over the next five years. To control the impact of rising motor insurance prices, Malaysian insurers are looking to implement technology-based solutions.”