Underinsurance in Malaysia: The Application of the Monte Carlo Simulation

Hendon Redzuan, Rubayah Yakob, Zaidi Isa



This study seeks to estimate the extent of underinsurance among Malaysian families in 2012. Underinsurance is quantified by the extent to which the citizens in a country are inadequately covered by the life insurance protection. To measure underinsurance, we use the concept of the life insurance protection gap as proposed by Swiss Re (2004). The mortality protection gap is the difference between the resources needed and the resources available. The resources needed refer to the resources the surviving dependents require for income replacement, debt repayment and other major expenses. The resources available refer to those resources actually available to the dependents from financial assets, social security and life insurance coverage. The data collected are simulated using the Monte Carlo simulation process. Statistical analysis of the results of the simulation runs indicates that, on average, the extent of underinsurance in Malaysia is about RM500,000 per household.

Keywords: Underinsurance; protection gap; life insurance; Monte Carlo simulation


Kajian ini bertujuan untuk menganggar tahap terkurang-insurans dalam kalangan keluarga Malaysia pada tahun 2012. Terkurang-insurans diukur melalui tahap rakyat sesebuah negara tidak dilindungi oleh insurans hayat yang mencukupi. Untuk mengukur terkurang-insurans, kami menggunakan konsep jurang perlindungan insurans hayat seperti yang diperkenalkan oleh Swiss Re. Jurang perlindungan mortaliti adalah perbezaan di antara sumber yang diperlukan dan sumber yang ada. Sumber yang diperlukan merujuk kepada sumber yang diperlukan oleh tanggungan yang masih hidup untuk penggantian pendapatan, pembayaran hutang dan perbelanjaan besar yang lain. Sumber yang ada merujuk kepada sumber yang boleh diperoleh oleh tanggungan daripada asset kewangan, keselamatan sosial dan perlindungan insurans hayat. Data yang dikumpul disimulasi menggunakan proses simulasi Monte Carlo. Analisa statistik ke atas hasil larian simulasi menunjukkan bahawa, pada puratanya, tahap terkurang insurans adalah lebih kurang RM500,000 bagi setiap keluarga.

Kata kunci: Terkurang-insurans; jurang perlindungan; insurans hayat; simulasi Monte Carlo


Underinsurance, protection gap, life insurance, Monte Carlo simulation

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