Top IT Challenges Faced by Insurance Companies in Malaysia
By Datuk Tan Seng Kit, Group Managing Director, Strateq Group
The insurance sector in Malaysia is a historic and prolific industry, established even before the independence and formation of Malaysia that has evolved and grown with the developments of the nation. Once again, it is undergoing a significant transformation, driven by the widespread digitalization, evolving customer expectations, and a highly regulated environment. As insurance companies strive to stay competitive and relevant, they face several IT-related challenges that impact their operational efficiency, customer experience, and regulatory compliance.
Many insurance companies in Malaysia still rely on legacy core systems that were built decades ago. These systems are often inflexible, difficult to maintain, and incompatible with modern technologies. Integrating legacy platforms with new digital tools, such as customer relationship management (CRM) systems, mobile apps, and data analytics platforms, poses a significant challenge. The lack of interoperability hampers innovation and increases operational risk. A complete replacement of these core legacy systems also requires major capital expenditure consideration further complicated by regional compatibility for multinational insurance companies.
The growing reliance on digital platforms has made insurance firms more vulnerable to cyber threats. Data breaches, ransomware attacks, and phishing scams have become increasingly sophisticated, catalysed by the rise of artificial intelligence tools abused by scammers & criminals. Insurance companies handle vast amounts of sensitive personal and financial data, making them prime targets. Ensuring robust cybersecurity measures while meeting regulatory standards like Malaysia’s Personal Data Protection Act (PDPA) is a continual challenge.
Insurance companies have been subject to Bank Negara Malaysia’s (BNM) regulations since 1988. Regulatory frameworks in Malaysia, including BNM guidelines and the PDPA, are becoming more complex. Insurers are required to demonstrate transparency, secure data usage, and regular compliance reporting. Implementing IT systems that support real-time compliance monitoring and accurate reporting across diverse data sources requires significant investment and strategic planning.
The modern Malaysian consumer expects seamless digital experiences, from policy acquisition to claims processing. Traditional insurance models, which often involve face-to-face interactions and paperwork, are being replaced by digital-first approaches. However, many insurers struggle to deliver user-friendly mobile apps, responsive customer portals, and AI-powered chatbots due to resource constraints or lack of in-house digital expertise.
The demand for skilled IT professionals in Malaysia far outweighs the supply. Insurance companies often find it difficult to attract and retain talent in fields such as data science, cybersecurity, and cloud engineering. This talent gap slows down digital initiatives and increases reliance on third-party vendors. Third-party vendors in itself introduce a secondary layer of risk through non standisation of development protocols which may impact costs of development, integration compatibility & cybersecurity resilience.
Insurers are beginning to harness big data and predictive analytics for better underwriting, fraud detection, and personalized offerings. However, implementing advanced analytics requires not just the right tools, but also clean, well-structured data and a clear governance framework. Many companies are still in the early stages of this journey and struggle with data silos and low data maturity. Unreliable data would lead to unattractive & uncompetitive products with long lasting impact to the companies financials.
To remain competitive in Malaysia’s rapidly evolving insurance landscape, companies must address these IT challenges head-on. Strategic investment in modern IT infrastructure, cybersecurity, talent development, and regulatory technology (RegTech) is essential. By embracing innovation and overcoming these hurdles, Malaysian insurers can unlock new growth opportunities and deliver superior value to their customers
References
- Bank Negara Malaysia. (2020). Policy Document on Risk Management in Technology (RMiT). https://www.bnm.gov.my
- Department of Personal Data Protection Malaysia. (2010). Personal Data Protection Act 2010. https://www.pdp.gov.my
- EY Global. (2023). 2023 Global Insurance Outlook. https://www.ey.com/en_us/insights/insurance/how-insurers-can-accelerate-value-creation-from-gaps-to-gains
- PwC Malaysia. (2023). Revolutionising financial inclusion through digital insurance.
https://www.pwc.com/my/en/publications/2023/revolutionising-financial-inclusion-through-digital-insurance-and-takaful.html - Malaysia Digital Economy Corporation (MDEC). (2023). Digital Economy Report. https://mdec.my