Prospect of a Flood Micro-Insurance in Malaysia: A Survey of Literatures

Abstract

There is no insurance policy in Malaysia which exclusively covers flood as a particular product. The reality of flood coverage in insurance is either it comes as a rider in fire insurance policy or as primary coverage in household/homeowner insurance policy. Perhaps it is due to the reason that flood insurance would require monthly high premium. Moreover, a report from 'Persatuan Insurance Am Malaysia' stated that Malaysians’ purchasing power is becoming smaller and cannot afford for insurance protection mechanism. Thus, micro insurance is a solution since the target customer for this product is the lower income earner. The impressive result from the establishment of flood micro-insurance is that it may reduce people’s dependency on the government when the disaster occurs. Therefore, it is necessary for the relevant parties to consider introducing a policy that protects flood victims with affordable rates particularly for those with lower income. Finally, considering the fact that conventional insurance policy is against the principles of Islamic law, a flood micro-takaful can be offered as an alternative to fulfill the interest of the Muslim customers.