According to the Malaysia Fintech Opportunity Report: Insurtech Outlook 2021/2022, less than 41% of Malaysians have life insurance and only 22% of Malaysians have personal health insurance. Adding to the low numbers, Malaysia’s B40 group remains the largest uninsured segment in the country.
Based on the Financial Stability and Payment Systems Report 2017 by Bank Negara Malaysia, the uptake of insurance and Takaful by Malaysia’s B40 community is disproportionately low when benchmarked against non-B40s. This gap even more pronounced in urban regions.
88% of non-B40s aged 20 to 59 in Kuala Lumpur have insurance coverage versus a mere 30% in the B40 community. A narrower gap is observed in more rural areas, with 30% of non-B40s aged 20 to 59 in Sabah having insurance compared with 19% among the B40s.
Existing insurance initiatives Perlindungan Tenang, Skim Perlindungan Nasional B40 and MDEC’s eBerkat Marketplace have offered various affordable packages for the B40 community members, but these have not been sufficient to close existing gaps.
In addressing these issues as well as other problems plaguing the industry, insurtech startups and entrepreneurs hold the key to provide greater access to communities and elevate insurtech innovation in Malaysia.
The report has also suggested six focus areas that can drive the future of Malaysia’s Insurtech scene – the improvement of digital banking services for the underserved, a greater focus on financial inclusivity for the B40 community, more cloud-based solutions to simplify the consumer purchasing journey, increased collaboration between insurtechs and incumbents, the development of digital insurance licenses, and finally, Malaysia being the leader of the global Takaful space.
We speak to Bikesh Lakhmichand, CEO & Founding Partner of 1337 Ventures on his thoughts on the growing insurtech landscape, gaps within the ecosystem and the solutions startups hold to close these gaps.
What are your thoughts and observations on the growing insurtech landscape in Malaysia?
It is no doubt exciting to witness and be a part of the growing insurtech landscape in Malaysia. We are encouraged by the growth of insurtech in Malaysia, and look forward to supporting the development of the insurtech industry alongside FWD, as well as our industry and regulatory partners. There are definitely gaps still in the market towards ensuring there are more flexible products in the market to cater for diverse needs. We hope with this report it does bring certain areas to focus and more startups attempt to solve for them and join the next couple of intakes we have for 2022.
What do insurtech startups need for strong growth in Malaysia?
For strong growth and acceleration, it is imperative for insurtech startups to have the right access to industry-specific knowledge, exposure, as well as partners for collaboration. This is what we aim to provide our startups with through our FWD Startup Studio Pre-accelerator programme, which not only provides our startups with funding opportunities, but also industry workshops, possible POCs, as well as assistance in potentially expanding to other countries in ASEAN.
What problem statements have 1337 Ventures identified that insurtech startups can solve?
Together with FWD, we have identified a list of problem statements for existing and aspiring insurtech startups, ranging from B40 community outreach, flexible and on-demand plans, to complicated insurance claims process.
FWD has also identified issues surrounding data privacy and security, barriers of literacy in Insurance and Takaful as well as the need to provide an efficient application process. Furthermore, the report has also highlighted that lack of “real” innovation contributes to the limited number of solutions, with most existing solutions focus on aggregation and distribution.
Additionally, the lack of education Insurance has resulted in many Malaysians not convinced of the importance of insurance.
In your previous cohorts, you have identified potential insurtech startups that can make a change. Can you share more?
In our previous cohorts, we’ve mentored a variety of applications from different verticals beyond fintech and insurtech, including proptech, agritech, healthtech and more. In fact, the top 2 winners from our first cohort were from the proptech (BlueDuck) and agritech (Kapitani) space. It is interesting to explore how different industry verticals can incorporate insurance into their service offerings for the wider Malaysian community.
Cohort 3 of the FWD Startup Studio is in plans. Can you share your aspirations and targets from the cohort?
We hope to be able to encourage more startups to dive into different parts of the insurance value chain, especially in less saturated areas such as underwriting and claims. As we approach 2022, we also hope to drive the Islamic Fintech scene in Malaysia through our events and programmes. With Malaysia taking the top spot in the global Islamic Fintech arena in 2021, we believe that it is the best time now for us to tap on this ever-growing industry.
The pre-accelerator programme, FWD Start-up Studio Alpha Startups for Insurtech Cohort 3 application is open, interested parties can register at https://fwdstartupstudio.com/pre-accelerator.
What are some of your key takeaways from this report and how do you think this report can help the insurance landscape in Malaysia?
Unfortunately, only 30.3% of B40 households are covered by life insurance or Takaful policies, despite the government’s target of reaching a national life insurance penetration of 75% by 2020. Even with growing ecosystem partnerships and flourishing Fintech and Insurtech opportunities, the B40 group remains the largest uninsured segment in the country.
Further, very few insurtechs are addressing parts of the value chain beyond sales and distribution due to the perceived high entry barrier in this regulated space, as well insufficient capital investment in value chain innovations. This results in the lack of customised products and services that are catered to different segments of the Malaysian population.
We hope that this report can encourage insurance incumbents, aspiring entrepreneurs and startups, as well as other stakeholders to work hand-in-hand to come up with innovative solutions to overcome these challenges.
How can public players such as Government agencies such as MDEC and others in the innovative segment help to come up with fitting policies to help insurtech startups?
There are support structures currently available, such as the Bank Negara Sandbox, which provides startups with the opportunity to operate in a “sandbox” environment, and MDEC’s Fintech Booster, which provides startups with the access to professional services required to navigate through the regulatory environment in Malaysia. Definitely, close collaboration between government agencies, regulators, and industry players are key to developing sound, accommodative policies and regulatory frameworks.
Apart from Government agencies, we encourage aspiring startup founders to check out Muru-ku.com, a one-stop platform of Malaysia Startup Ecosystem. We’ve mapped up to 660+ Malaysian Startups and a platform filled with resources such as The VC List, Grant List, Startup Events & Problem Statements to solve.
Visit https://muru-ku.com to learn more and submit your startup if it’s not already listed.