Insurance companies are among the quiet engines powering Malaysia’s economy. They protect businesses, homes and vehicles, finance medical treatment through claims, support investment and allow companies and individuals to take financial risks without one disaster necessarily wiping everything out.
The numbers show the industry’s significance. Malaysia’s general insurance industry recorded RM24.2 billion in gross written premiums in 2025, an increase of 4.8% from RM23.1 billion in 2024. The industry also recorded RM1.2 billion in underwriting profit. Motor insurance alone represented 45.2% of total premiums.
Insurance is therefore not merely something Malaysians purchase because the bank, employer or law requires it. It is part of the financial infrastructure supporting the economy.
When a factory is insured, an entrepreneur can invest millions knowing that a fire does not necessarily mean the end of the business. When cargo is insured, companies can trade internationally with greater confidence. When a building is insured, lenders have greater protection over the assets supporting their financing.
When claims are paid, that money also flows back into economic activity. Motor claims support workshops, mechanics, spare-parts suppliers, adjusters and towing businesses. Property claims support contractors and suppliers. Medical insurance supports private hospitals, doctors, laboratories and pharmacies.
Insurance is effectively an economic shock absorber.
But there is an uncomfortable question Malaysia rarely discusses:
What happens when only those with enough disposable income can afford a strong shock absorber?
The Insurance Paradox
The basic concept of insurance is brilliant. Thousands of people contribute relatively small amounts into a pool so that the unfortunate few experiencing major losses do not have to carry those losses alone. The problem is that participation costs money. A middle- or upper-income Malaysian might have medical insurance, life insurance, critical illness coverage, personal accident insurance, motor insurance and home insurance. But imagine a worker earning RM2,500 or RM3,000 a month.
After rent, food, transportation, children’s expenses, utilities and loan repayments, how much is actually left to insure against something that might happen? This creates an uncomfortable paradox.
The people who would be financially devastated most by an emergency can also be the people with the least disposable income available to protect themselves against it.
A person with RM500,000 in savings suffering a RM20,000 emergency still has considerable financial resources. A family with RM2,000 in savings facing the same RM20,000 emergency has a crisis. Yet the first person can generally afford substantially more insurance protection than the second.
When Protection Becomes About Purchasing Power.
This doesn’t mean insurance companies deliberately exclude poor Malaysians. Insurance is a commercial risk-pooling business. Insurers must collect enough premiums to cover expected claims, operating expenses and capital requirements. If the cost of claims increases substantially, premiums eventually face upward pressure.
Motor insurance provides an interesting example. Despite the overall general insurance industry recording RM1.2 billion in underwriting profit in 2025, motor insurance actually recorded an underwriting loss of RM289.3 million, with a combined ratio of 103%. So portraying every premium increase simply as corporate greed misses an important part of the economics.
The affordability problem is particularly visible in healthcare.
Malaysia has faced significant medical-cost inflation, increasing pressure on medical insurance premiums. The insurance and takaful industry has consequently introduced measures including spreading certain premium increases over three years and providing alternative, more affordable medical plans. But even an economically justified premium can still be unaffordable to someone.
That distinction matters.
A RM200 monthly medical policy might represent a relatively small expense for someone earning RM15,000. For someone earning RM2,500, RM200 represents 8% of gross monthly income—before food, rent, transportation and everything else.
The policy may be available. But is it genuinely accessible?
The Wealthy Don’t Just Own More, They Can Protect More.
This is where insurance becomes connected to inequality. We usually measure wealth inequality according to what people own. But perhaps we should also examine people’s ability to protect what they own. A wealthier household can insure its home, vehicles, health, life and other assets. When disaster strikes, insurance can help restore part of what was lost.
A poorer household may have fewer assets and less insurance. When the same disaster occurs, the loss can become permanent. A flood that destroys RM20,000 worth of household belongings could be an inconvenience to one family and a financial catastrophe to another. Malaysia’s continuing flood protection gap demonstrates that this is not merely theoretical. PIAM has highlighted persistent gaps in flood protection, including in East Malaysia. When uninsured losses occur, somebody still pays.
Sometimes families exhaust their savings. Sometimes they borrow. Sometimes relatives help. Sometimes government assistance becomes necessary. The economic cost doesn’t disappear simply because there isn’t an insurance policy.
Yet Malaysia Needs Insurance Companies.
The answer cannot be to demonise insurers. Malaysia needs financially strong insurance companies. They protect billions of ringgit worth of property, vehicles, infrastructure and commercial activity. They allow businesses to manage risks. They support employment and professional services throughout their ecosystem. Fire insurance alone accounted for approximately RM5 billion in premiums in 2025, while personal accident insurance reached RM1.6 billion. Marine, aviation and transit insurance protects economic activities connected to trade and transportation. Without insurance, many economic activities would become substantially riskier.
The real debate therefore shouldn’t be:
“Are insurance companies good or bad?”
It should be:
“How do we make financial protection accessible without making the insurance system financially unsustainable?”
Basic Protection Cannot Become a Luxury.
Malaysia may eventually need to think about insurance as part of its broader social-protection architecture. Commercial insurance can continue providing different levels of protection according to what customers want and can afford. There is nothing inherently wrong with someone paying more for greater benefits. But basic protection against financially catastrophic events deserves special attention.
Microinsurance and microtakaful can be expanded. Affordable group insurance through employers and associations could provide larger risk pools. Government and insurers could explore public-private protection mechanisms for certain catastrophic risks. Digital distribution could help reduce costs. Most importantly, Malaysia must address the underlying causes of rapidly increasing costs rather than expecting insurers or consumers alone to absorb them. The objective should not be free insurance for everybody.
It should be affordable protection for as many Malaysians as possible.
Two Malaysias Should Not Emerge.
Insurance companies make an undeniable contribution to Malaysia’s economy. They protect investments, compensate losses, support businesses, facilitate commerce and provide financial stability when accidents and disasters occur. But Malaysia should be careful that insurance does not unintentionally create another dividing line between economic classes. We cannot reach a situation where one Malaysia experiences illness, accidents, floods and fires as insured financial setbacks, while another Malaysia experiences the same events as financial catastrophes. Because ultimately, the Malaysian earning RM2,500 does not need financial protection less than the Malaysian earning RM20,000.
In many cases, the person earning RM2,500 needs it more.
The future of Malaysia’s insurance industry therefore should not be judged solely by how many billions of ringgit it collects in premiums or how much profit it generates.
Perhaps there is a more important measurement:
How many Malaysians can actually afford to be protected?
A successful insurance industry protects the economy. A truly inclusive insurance system protects the people who make that economy possible.
