Skip to main content


ITC Asia

19 Jul 2023

Enhancing Financial Inclusion for Underserved Communities and SMEs in Malaysia

In conversation with leading industry experts, ITC Asia identified vast potentialities within the Malaysian InsurTech landscape. The country's significant uninsured population, coupled with the increased digitalization, presents an enormous opportunity for the insurance ecosystem to flourish. 

In recent years, unanticipated economic and business disruptions due to events like the COVID-19 pandemic and climate-related disasters have exposed the financial vulnerability of uninsured and underinsured communities. With a population of over 33 million and an insurance penetration rate of only 54% as of 2022, Malaysia houses a substantial uninsured populace. Only 15% of small-and-medium enterprises (SMEs) and 25% of working adults from lower-income households have some form of insurance or takaful cover.  

As stated in BNM Digital Insurance and Takaful Operators (DITO) Licensing and Regulatory Framework, this disparity is primarily driven by market inefficiencies, limited financial resources, and a lack of awareness about the value of financial protection. They are most susceptible to external shocks, offering a significant growth avenue for the insurance sector. 

A Shift in Product Offerings 

The future of insurance in Malaysia hinges on the successful development and deployment of products tailored to specific customer segments. Rangam Bir, CEO & MD, AmMetLife Insurance Berhad echos this sentiment as he shares with ITC Asia that “The Malaysian insurance market is moving from standardized, differentiated products in the past towards more targeted products to specific customer segments”.  

The transformation, however, doesn't end with the creation of these targeted products. A significant part of this evolution involves the distribution of these products. “There will be a very differentiated distribution of products - how do you get that product marketed and reach out to the right customers for which the product is designed? Getting it to market, getting it to the customer beyond the traditional distribution channel is going to be quite key” he added.  

Embracing Digital Technology 

With consumers becoming increasingly digitally savvy, it is imperative that insurance providers meet them where they are - online. In an interview with ITC Asia, Khoo Ai Lin, CEO of Zurich Life Insurance Malaysia Berhad, highlighted the need for significant investment in user-friendly interfaces and the incorporation of gamification elements. She argued that such strategies are crucial to engaging customers, particularly the digitally savvy ones, who typically have shorter attention spans. 

Following the release of the Discussion Paper, BNM published its draft for review regarding DITO, inviting written responses. By primarily utilizing digital or electronic channels, the DITO operators are to cater to underrepresented markets and augment the customer experience. The utilization of digital platforms and technologies for end-to-end operations from underwriting, customer onboarding to claims processing and payments, encourages a thriving ecosystem for startups and InsurTechs. These technologies could bring down costs and make insurance more accessible to the wider public, setting the stage for a contactless digital insurance revolution. 

Integrating Physical Touchpoints 

“We want to educate the B40s, whether it is protection or medical.” Ms. Khoo highlights the importance of education in schools to raise awareness of savings and protection. She emphasized the importance of implementing financial education in schools to instill early awareness of savings and protection. She also brought to light the necessity of alternative channels to engage and educate the B40s (the bottom 40 percent of income earners) about protection and medical insurance.  

"The crucial question is whether our current infrastructure is equipped enough to reach out to them effectively,” she mused.  

This is reflected in the BNM's New DITO Draft Framework as the revised draft is more flexible, permitting the use of physical channels. This change allows DITOs to serve underserved segments better, even when digital infrastructure is lacking, by providing limited physical touchpoints for critical services like claim submissions and customer complaints handling. 

Regulatory Environment 

The regulatory environment in Malaysia, especially the proactive role of Bank Negara Malaysia (BNM), has played a crucial part in fostering InsurTech innovation as well as digital transformation. The Regulatory Sandbox approach has provided a supportive environment for InsurTech to test new business models, procedures, and applications. Currently, 31 insurance applications are under review, with notable contenders like Tune Protect Ventures Sdn Bhd, Vsure Tech Sdn Bhd, and Qoala Technology Sdn Bhd. 

With a robust ecosystem of startups, regulatory support, and vast untapped potential, the Malaysian InsurTech sector is set to reach unprecedented heights, revolutionizing the country's insurance landscape. 

View all Articles