BY the looks of it, 2021 is set to go down in history as yet another tough year.
The ongoing political volatility coupled with the repercussions and uncertainties brought about by the COVID-19 pandemic has posed numerous new challenges to various industries and is expected to continue doing so for the unforeseeable future.
The insurance industry, too, isn’t spared. In fact, the business environment for insurers has been tough, with a great need to gear up for a rough final quarter for 2021, according to Allianz Malaysia Bhd CEO Zakri Khir.
“Insurance is not exactly the first thing you think of buying when you wake up in the morning,” he told FocusM. “When you have an unprecedented pandemic like COVID-19, human behaviour trends in how people purchase insurance becomes much more evident.”
With general insurance, it is about insuring the assets you acquire – and with less disposable income and some employment segments like the B40 being driven into extreme poverty – people are just not acquiring assets.
One good example is motor insurance which is a huge component in the general insurance industry.
Frugal customer spending, even with those who are better off financially, has led to a significant drop in vehicle sales which have resulted in a regression in consumption of general insurance products and a downtrend in this segment.
In fact, the Malaysian Automotive Association (MAA) said recently that many car dealerships would have to close down should lockdown restrictions continue.
New vehicle sales plunged 95.7% year-on-year to 1,921 units in June 2021 from 44,755 units recorded in the same month a year ago.
“Passenger vehicles accounted for the majority of sales volume in June 2021 with 1,841 units sold while commercial vehicles accounted for 80 units. This alone tells you the kind of impact the industry has had to deal with,” Zakri remarked.
Life insurance, on the other hand, is another thing altogether, seeing as to how people need protection in the event of untimely demise.
With the COVID-19 pandemic, people are apparently not taking any chances with their well-being, health and safety, and as a result, some will still purchase life insurance, especially those who are in a better financial position to do so.
And the latest statistics is evidence of this. According to the latest Allianz Global Insurance Report 2021, the Malaysian insurance market advanced by 4.9% in 2020.
This particular development is attributable to the life insurance business which accounted for 70% of premium income and increased by 7.6% more or less in line with pre-crisis growth levels. Premiums in the general insurance segment, meanwhile, declined by 1.0%.
“Insurers are now launching products and initiatives which are deemed relevant to customers,” Zakri pointed out. “The question now is whether customers will buy these products since priorities are now centred around genuine concerns of job security and job losses.”
In this case, insurers are faced with the stark reality that insurance will never be on top of customers’ lists.
Nevertheless, some optimism is warranted especially following the Government’s recent announcement that 11 types of economic activities are allowed to reopen in states under Phase 1 of the National Recovery Plan, the relaxing of some SOPs for those who are fully vaccinated and an increase in vaccination capacity.
“We can only hope that the economy will eventually pick up and that there will be better days ahead,” Zakri opined. – Aug 24, 2021.
