Question

Reason why Malaysian are under-insured with example. (35m)

Answer 1

Buying a life insurance policy as soon as we are able to is a responsibility that most Malaysians fail to accomplish. This important step to secure the long-term livelihood of our loved ones is often rejected due to a variety of reasons.

According to the Life Insurance Association of Malaysia (LIAM), only 12.6 million Malaysians are currently covered by life insurance policies in 2017, a figure which only grew by a paltry 0.1% from 2016. While growth is still positive, another statistic should give Malaysians a bit of food for thought: the sum assured per capita is an average of RM42,992 in 2017 (the sum assured is the minimum guaranteed payout that the policyholder will receive should the he/she passes away).

If that amount looks too low to sustain the livelihood of those who depend on you, that is also statistically correct. In a press release, LIAM noted that “based on 2012 Underinsurance Study in Malaysia undertaken by University Kebangsaan Malaysia and LIAM in 2013, the average mortality gap for each member of a family is about RM100,000 to RM150,000.”(the mortality gap is essentially the difference between the amount of sum assured and the actual amount they need to sustain surviving loved ones.)

Clearly, there is a disparity between the benefits of life insurance and the perception of it in the consumer’s eye. So, why is this happening?

Perception: life insurance is too expensive.

Reality:

This is easily the most common preconception about life insurance, not just among Malaysians, but around the world. For the low- and middle-income earners, many find it difficult to take on an additional monthly expenditure that will likely already be burdened by monthly loan repayments for car, property, and education. Young families will be even more hard-pressed, with infant-related expenses to consider. As a result, life insurance is considered a “luxury expense”.

The fact is that life insurance policies can be scaled based on the individual’s salary range as well as sum assured. There are policies that can go even below RM3 a day, while providing five-figure guaranteed coverage. That’s lower than what you pay for a plate of “Maggi goreng”, and less than half the price you pay for a cup of bubble tea. And, many don’t consider that as we grow into new jobs and larger salaries, we can opt to buy additional policies with larger guaranteed payouts and benefits.

For example, the Zurich SureCover policy can be subscribed at a monthly premium from just RM75 per month, but guarantees up to 500% of the basic sum assured should the life assured suffers an accidental death. It’s also got a unique Guaranteed Acceptance feature that provides coverage for life assured from age 35 until 80 years old. On the other hand, should the life assured lives on to 100 years old, the policy will mature and offer a lump sum payout of 188% of the total premiums paid.