KUALA LUMPUR: General insurers in Malaysia expect a difficult 2009 as the global economic slowdown takes its toll on insurance premium growth and on rising claims ratio, said Persatuan Insurans Am Malaysia (PIAM).

The association said general insurance companies were bracing for a rough 2009 as average motor premium continued to fall while insurers suffered from higher-than-expected claims ratio. Motor insurance comprises 44.3% of the overall general insurance business in Malaysia.

PIAM said general insurers paid out RM3.49 billion or an average RM9.6 million a day in 2007 for motor claims, out of the total gross premiums of RM4.68 billion collected in that year.

"The combined claims ratio (claims cost including acquisition and management expenses) amounted to 114% in 2007. This claims ratio deteriorated further to 121% in the first half of 2008," it said in a statement yesterday.

PIAM's executive director, Lim Chia Fook, said: "This means that for every ringgit of motor insurance premium collected in 2007, insurers' expended RM1.14 to pay claims and cost of acquiring and managing the business. This figure deteriorated further to RM1.21 for every ringgit of premium earned in the first half of 2008."

As a result, he said premiums collected from other classes of insurance business such as fire insurance were used to subsidise the payment of motor claims.

PIAM said the Malaysian general insurance companies had been suffering from high claims ratio which exceeded 100% in four of the last five years.

The factors contributing to the claims ratio were largely due to increase in the frequency of vehicle thefts and road accidents as well as increasing severity of claims cost per accident especially for third party bodily injury claims.

It said despite the reduction in fatal accident rates in the last year following the successful road safety awareness campaigns by the Road Safety Department, claims paid out by insurers continued to show an increasing trend.

Furthermore, claims ratios for third party bodily injury claims alone which exceeded 100% for many years skyrocketed to 262% in 2007 and 340% in the first half of 2008.

PIAM said express buses and goods vehicle were major contributors to the underwriting losses in the motor insurance class and had the highest claims ratios. In 2007, the combined claims ratio for express buses was 335%, followed by goods vehicles at 155%.

It said the rising motor claims made by young drivers were also another major concern to the general insurers. Industry statistics showed that the claims ratio attributed to young drivers (25 years and below) is about 40% higher compared to other insured age groups.

PIAM said the further increase in labour costs for vehicle repair, falling vehicle values and the contraction of motor vehicle sales were contributing factors to the declining motor premium income and increasing claims ratio in the largest class of business underwritten.

It said the rising motor claims ratio had resulted in insurers adopting more stringent underwriting controls on motor insurance, including the application of premium loadings. Furthermore, this could impact the renewal and availability of motor insurance in 2009.