KUALA LUMPUR, April 19 (Bernama) -- The insurance market is expected to register improved results in 2010 on the back of economic recovery and increasing awareness on the role of insurance as a protection and financial planning tool.

In stating this, Bank Negara Malaysia (BNM) assistant governor Datuk Muhammad Ibrahim said improvements in the employment market, rising disposable income and revival in economic activities will generate spins-off to the insurance sector and create a greater demand for insurance products.

"Nevertheless, the operating environment for the insurance industry in 2010 is expected to remain challenging," he said in his keynote address at the International Claims Convention 2010 organised by the Malaysian Insurance Institute here Monday.

The text of his speech was read by Bank Negara's director of consumer and market conduct, Koid Swee Lian.

Muhammad said despite optimism on the economic and financial conditions as the financial markets continued to stabilise in early 2010, the low-yield investment environment will continue to pose near-term challenges for insurers.

In the past, he said, investment earnings had predominantly been relied upon to offset any setback in insurers' underwriting performance but such expectations might be altered in the near term.

"The financial crisis is a clear reminder for insurers to return to basics and focus on its core function of sound business underwriting," he added.

According to Muhammad, there are three pertinent challenges to sustain the growth in the insurance industry.

"Firstly, the critical role of insurers in every aspect of the claims management value chain. Claims intimidation, fraud detection and prevention, claim assessment and settlement, and complaint resolution are areas requiring close monitoring by insurers and, where necessary, timely intervention to detect and prevent leakages," he said.

Muhammad said insurers have to assess their vulnerability and address the risk of fraud efficiently to reinforce a positive image of the industry to the public.

Customers must be kept informed of the progress of their claims and be given clear explanation when a claim is rejected or not settled in full, he said.

Secondly, Muhammad said, the difficult challenge in detecting and preventing insurance fraud, which is a crime against all segments of society and not a victimless crime as perceived by many.

"Due to the long supply chain and participation of numerous stakeholders, especially in the general sector, insurance fraud is easily committed and is a major source of leakage for the industry, thereby hiking up claims costs," he said.

"Insurance fraudsters are also adept at hiding behind the protective shield of jurisdictional boundaries."

Muhammad said the insurance industry could leverage on the work of the US-based International Association of Insurance Fraud Agencies Inc, which was playing an important role in tracking down insurance fraudsters.

Insurers, he said, should also focus on ensuring the health of the entire claims management value chain as the complex nature of claims required multiple parties with different skill sets and expertise as well as efficiency in service delivery in order for the claimant to receive fair compensation expediently.

Misconceptions, suspicions and unnecessary disputes must be minimised for the benefit of all parties, Muhammad said.

This could be achieved by greater collaboration between parties in the claims management chain, beginning with the loss adjuster in the field to the insurer processing the claim, he said.

Muhammad said insurers and loss adjusters should also concentrate on attracting and retaining experienced talent that could be the first line of protection against fraudulent behaviour.

Loss adjusters play a significant role as independent intermediaries in facilitating a fair and reasonable compensation for the insured, he said.