Economists have welcomed the move to allow Employees Provident Fund (EPF) members to buy insurance or takaful products with the funds in their Account 2, saying this will provide them with an extra layer of protection against uncertainties.
Speaking to MalaysiaNow, they described it as an appropriate step that would ensure the social and economic well-being of EPF contributors.
The platform, called i-Lindung, was launched by the retirement fund last week to facilitate the purchase of insurance and takaful products including life and critical illness coverage at affordable premiums.
Economist Ahmed Razman Abdul Latiff said the move would benefit those in the middle-income or M40 group given that similar provisions had been made for the B40 or Bottom 40 group in the 2022 budget announced in October last year.
"The government had already provided assistance for the purchase of insurance and takaful products, but this was mainly targeted at those in the B40 bracket," Razman, of Putra Business School, said.
"The move announced by the EPF will provide more benefits for the M40 group who are also struggling to buy insurance. This will give them a chance for social protection."
Fellow economist Barjoyai Bardai meanwhile said the move would not affect members' EPF savings since the purchase of insurance products would only be made through the second account.
He said it made sense to place the purchase of such products under Account 2 which, in the first place, was meant to facilitate matters for members in the areas of education and housing financing.
"Account 1 provides coverage in terms of retirement income in addition to insurance and takaful coverage.
"This, in a nutshell, provides balanced or double protection," he said.
The Life Insurance Association of Malaysia (LIAM) meanwhile urged the government to open the i-Lindung platform to more life insurance operators in the country for the provision of products which would offer more benefits to consumers.
LIAM president Loh Guat Lan said at the moment, the take-up rate for insurance and takaful products in Malaysia is about 56.1%.
"If we take into account the policyholders who have more than one policy, this figure drops to 41%," he added.
"This means that four in 10 Malaysians have life insurance. Of these, only 4% of B40 households have insurance or takaful coverage."
Meanwhile, there are those who have insurance but whose coverage does not include their family members.
Loh estimates that the average amount of protection taken by Malaysians is about RM50,000 – far from enough.
Citing a study published in collaboration with Universiti Kebangsaan Malaysia in 2013, he said, there was a huge gap in coverage for families with life insurance.
"In general, the difference ranges between RM100,000 and RM150,000 for each family member," he said.
"A family with five members would need at least RM553,000 to survive the next five years if the breadwinner becomes disabled or dies."
Loh said the launch of the i-Lindung platform should be used to address the low rates of insurance and takaful coverage in the country.
He said the life insurance industry would also continue to raise awareness about the need for insurance protection at all levels of society.
"We have already outlined a five-year roadmap and strategy to achieve our targets," he said.