During recent episodes of market volatility which saw substantial capital outflows by foreign portfolio investors, insurance companies were among the large domestic institutional investors that provided stability to the market. Indeed, the insurance has become an important component in the Malaysian market in contributing towards the growth of bond and sukuk markets. Low penetration signals opportunities for insurers There is no doubt that the industry has come a long way. This journey has been made possible with the commitment of many in this room today who have led their various institutions to greater heights, and who understood and supported the reforms introduced in the industry over the last two and half decades were critical to take the industry to a new  BIS central bankers’ speeches  1  level of maturity. It was painful but necessary. The fruits of the various reforms we made are for all to see. The industry is now more resilient and robust. Over the last 4 decades together, we had laid a strong foundation for the insurance industry to grow even larger. Therefore, our aspirations for the industry ought to be more ambitious. Under the Government’s Economic Transformation Programme (ETP), a penetration level of 75% by 2020 has been set as a goal for the industry. After two decades of steady growth, the current level of insurance and takaful penetration, at 54%, still remains below targeted level. While this ratio is in no way flattering, it also reflects the enormous untapped potential in the Malaysian insurance sector.
Medical inflation has been on a rising trend with millions of ringgit spent in Malaysia on healthcare expenditure each year. Old age and urban poverty are also on the rise with many exhausting their lifetime savings within the first five years of retirement. These are structural issues that have deep implications on the industry. It should be discussed and debated intelligently. To my mind, the focus of debate therefore should be on how to improve the productivity of agents, and ensure that they are well supported through training and continuing professional development and given all the assistance to provide quality advice and services to the public. More should be done to educate consumers on the benefits of insurance and the advantages of purchasing insurance while one is young and healthy. In this regard, the industry should come together and address the reasons for the low take up of annuity products despite the tax relief and incentives provided by the Government in 2012. Initiatives should be pursued to expand affordable product offerings for lower income groups that are most vulnerable to income shocks or unanticipated expenditures. Another area that is becoming significant because of medical inflation is ensuring that medical and health insurance provides adequate protection and remains affordable through well designed products, proper underwriting and effective control of claims costs should be a priority. The issues I had outlined are formidable and these cannot be accomplished without concerted effort by all of us here.