Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus , speaking at the Malaysian Insurance Institute summit, called for more consolidation in the industry in order to achieve 'transformational change'.

The governor also addressed the role of insurance within the context of developments that are shaping the Malaysian economy.

Datuk Yunus began by highlighting the important part that insurance plays in the modern economy and the financial system. “There is a positive relationship between economic growth and insurance development,” he said. “This is borne out by studies which have shown that more developed markets have a higher share of insurance in the economy.

“A core purpose of insurance is providing protection against individual and business risks through risk transfer and pooling. This improves individual welfare, and supports consumption and investment activities,” he said.

He added that, “A well-developed insurance sector also contributes to wider economic efficiency and resilience,” before adding a cautionary note: “It is sobering to note that for Malaysia, insurance merely accounts for 1.7% of GDP and only 5.8% of financial assets.  Clearly, there is significant, untapped potential for the industry to increase its broader economic impact, and feature much more prominently in Malaysia’s growth story. However, this cannot happen unless the industry steps up its game and takes a more strategic view of its role in the economy – working much more proactively across the industry and with relevant bodies and agencies.”

Health insurance was also in the governor’s crosshairs when he said, “Another pressing issue is the role of the industry in supporting a sustainable and comprehensive healthcare system in Malaysia. Health expenditure is around 4.6% of GDP. In fact, the Malaysian medical and health insurance market has the highest average gross medical inflation. It was around 15.4% in 2018. It is expected to continue rising.”

Looking to the future he said, “It is therefore timely, if not more urgent, for institutions to consider synergistic partnerships to achieve the scale and competitive edge to lift performance and break into new markets.  Our economy is in need of transformational change in the insurance sector – not incremental ones. To achieve this, we believe there is room for further consolidation in the industry.”