Tuesday August 21, 2012
Stronger growth in insurance sector seen
By DALJIT DHESI
PETALING JAYA: Although the recent legal suit brought by Silver Bird Group Bhd against its auditors may bring professional indemnity insurance into play, industry players see this class of insurance gaining stronger growth and prominence in the next few years.
The reason for this is due to greater awareness among consumers and companies that they have the legal right to sue for professional negligence and the rising number of professionals in the country.
Professional indemnity insurance covers professionals for claims made against them by their clients for losses incurred from negligence or breach of duty of care.
Allianz General Insurance Company (M) Bhd CEO Zakri Khir told StarBiz the demand for professional indemnity insurance had surged as more professionals realised the importance of this insurance cover and others buying it to meet requirements by professional bodies or contractual obligations imposed by the principal.
“Consumers who are educated, for example, understand they have the legal rights to bring a suit against their consultant or the professional company when their professional duties cause negligence or bodily injury to a third party.
“A greater awareness is also seen through published articles by the media on the negligent acts brought against the professional company.
“The increase in the number of professionals and professional firms will naturally bring about an increase in the demand for this type of insurance,'' he added.
For example, the gross premium for Allianz Malaysia's professional indemnity insurance portfolio had grown over the last three years. In 2009, gross premiums stood at RM14.7mil and rose to RM19.6mil in 2010 and further surged to RM22.9mmil in 2011.
In percentage growth terms, this class of insurance grew 3.3% in 2009, 32.8% in 2010 and 17.35% in 2011.
While the demand for professional indemnity insurance was expected to increase, Zakri said he did not see premiums going up in tandem with this increase partly due to competition among the insurance companies to increase market share.
He also said that consumers were also more price-sensitive towards the insurance cost rather than their product provider.
ACE Jerneh Insurance Bhd country president Steve Crouch said with the extension of the tax deduction for professional indemnity insurance premium expense to all professionals, the company expected to see an uptick in demand for this type of insurance, especially as the small and medium enterprise industry grew and more professionals venture into private practice.
In 2009, the tax deduction for this insurance premium expense was extended to all professionals who undertook the business of their profession; regardless of whether the purchase of a professional indemnity insurance policy was a requirement under the profession's by-laws or statute.
In Malaysia, he said this type of insurance was not as prevalent compared with developed and litigious countries like the United States, Australia and Europe.
As the Malaysian market becomes more affluent and sophisticated, professional indemnity insurance would become an important part of risk management, especially for businesses in the service industry, to protect the business interests against legal claims for business owners as well as their employees, he said. Crouch said the company did not envisage a rise in premium rates resulting from an increased in demand, noting that premiums for professional indemnity insurance were largely based on coverage required and varied by industry.