Malaysia, with its vibrant economy and diverse population, is witnessing a digital revolution across various sectors. In particular, the insurance industry is undergoing a significant transformation, and Electronic Know Your Customer (eKYC) technology is playing a pivotal role in reshaping the way insurance is bought, sold, and managed.
Cumbersome and lengthy insurance onboarding procedures have long contributed to the low insurance adoption rates among Malaysians. With digital alternatives readily accessible, customers no longer find the motivation to engage in face-to-face meetings with insurance agents and navigate through extensive paperwork. As Malaysia’s insurers integrate eKYC into their operations, they are not only improving convenience and efficiency but also fostering a more digitally inclusive insurance landscape.
How Many Malaysians Are Insured?
The insurance penetration rates among Malaysians leave much room for concern. Many Malaysians are not insured, which might be attributed to certain factors such as the tedious and lengthworthy onboarding processes.
According to a report by PIDM, less than half of Malaysians have life insurance, and only around 54% have health insurance. In another study involving 19,959 respondents from the 2015 National Health Morbidity Survey, a total of 56.6% of the analysed population was uninsured. The NHMS 2019 also reported only 22% of the population is insured with personal health plans.
How Does eKYC Work?
💡 eKYC (electronic know your customer) is a process of verifying a customer’s identity using electronic means, such as facial recognition, biometric scanning, and other digital tools.
eKYC is a digital process that leverages sophisticated techniques to verify the identity of insurance applicants. This process replaces the traditional paper-based KYC system, which involves customers providing physical documents to prove their identity. eKYC streamlines the onboarding process by allowing customers to submit their identification and other necessary documents electronically — via a mobile application or a web portal.
The eKYC process typically involves the following steps:
1. Document Upload: Customers are required to scan or take a photo of their identification documents, such as their passport, driver’s license, or Aadhar card.
2. Facial Recognition: Most eKYC solutions utilise biometric verification technology, such as facial recognition technology to match the image on the ID document with a selfie taken by the customer.
3. Verification: The uploaded documents are verified against the information in government databases or other trusted sources to confirm the customer’s identity.
4. Consent: The customer provides consent for the insurance company to access their personal information for onboarding.
5. Instant Approval: The customer’s application can be approved almost instantly once the eKYC process has been completed. This is a big step up in reducing onboarding times.
How Can eKYC Be Used As A Means To Expand Digital Insurance Access In Malaysia?
Streamlined Onboarding and Policy Issuance:
Traditionally, acquiring an insurance policy involved an extensive paper trail and time-consuming processes. The integration of eKYC in Malaysia’s insurance sector can drastically improve the speed and convenience of onboarding procedures.
Digital identity verification allows insurers to authenticate customers swiftly which reduces the time it takes to approve policies. This streamlined process translates to a more efficient and customer-friendly experience thus, making insurance accessible to a larger percentage of the Malaysian population.
Heightened Fraud Prevention:
Insurance fraud poses a significant challenge globally, and Malaysia is no exception. eKYC technology serves as the first line of defense in the fight against fraudulent activities within the insurance industry.
Insurers can mitigate risks associated with false claims, identity theft, and other fraudulent practices by verifying the identity of policyholders beforehand, through digital means. This not only protects the financial interests of insurers but also secures trust among policyholders.
Tailored Insurance Solutions Through Data Insights:
eKYC not only verifies customer identities but also enables insurers to gather valuable data about their clients. This data can be harnessed to create more personalised and targeted insurance offerings.
Insurers in Malaysia can then use these insights derived from eKYC processes to understand customer preferences and behaviours. This allows them to tailor policies that better meet the unique needs of individual policyholders.
Ensuring Regulatory Compliance and Data Security:
The insurance sector is continuously subject to stringent regulatory requirements to safeguard customer interests and uphold industry standards.
eKYC solutions can aid Malaysian insurers in adhering to these regulations by providing a secure and standardised method for customer identity verification. This not only ensures compliance but also strengthens data security by protecting sensitive customer information from potential breaches.
Promoting Financial Inclusion:
In a nation as diverse as Malaysia, achieving financial inclusion is a priority. eKYC facilitates this goal within the insurance sector by making services more accessible. Individuals can access and obtain insurance coverage regardless of geographical location or demographic factors.
Challenges Facing The Malaysian Insurance Industry?
Challenges such as data privacy concerns and technology adoption disparities must be addressed. Collaborative efforts involving insurers, regulatory bodies, and technology providers are crucial to overcoming these challenges and fostering a seamless integration of eKYC within the industry.
- Legal Provisions: The eKYC process requires critical privacy and data protection measures, which may involve navigating complex legal requirements.
- High Cost of Implementation: Implementing eKYC technology can be expensive, and the costs may not be offset by the potential benefits for some time.
- User Training: Training users on how to use the eKYC system effectively is essential for successful implementation. Insurance providers will need to invest in user research, usability testing, and providing clear instructions and intuitive workflows.
- Technical Infrastructure and Integration: Integrating an eKYC system within existing IT infrastructure can be challenging as the issues of compatibility and scalability with various databases and systems may arise.
- Regulatory Compliance: Insurance providers will need to thoroughly understand and comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) data protection laws and privacy regulations, and proactively monitor and adapt to evolving regulatory landscapes.
- Data Security and Privacy: Ensuring the security and privacy of customer data is of utmost importance in eKYC systems. Implementing robust security measures, such as encryption protocols, secure data storage, and access controls, is necessary.
Bottom Line
Amid Malaysia’s digital revolution, the insurance sector is experiencing a profound shift driven by eKYC technology. As insurers integrate eKYC, they not only streamline onboarding processes, but also contribute to the nation’s goal of financial inclusion.
However, challenges like legal complexities, implementation costs, and data privacy concerns must be tackled collaboratively by insurers to ensure a seamless and secure integration of eKYC within the Malaysian insurance landscape.
The trajectory toward a more digitally inclusive future for insurance in Malaysia holds promise, provided these challenges are met with strategic solutions.
To learn about how eKYC can help improve the user experience for Malaysian insurers, we have another article worth checking out here.
Consumers today demand convenience and seamless transactions that align with their busy and fast-paced lifestyles. Innov8tif aims to empower the insurance industry with the tools needed to keep up with this rising demand. Gone are the days of tedious and length-worthy onboarding processes, our proprietary EMAS eKYC solution is designed to streamline customer onboarding, offering a swift and user-friendly experience.
With EMAS eKYC, insurance companies can bid farewell to paperwork hassles.
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