Malaysia is a country with an equatorial climate—a climate which is distinguished by consistent high mean annual temperature and high monthly rainfall. Nevertheless, in the case of Malaysia, the precipitation tends to be higher during the northeast monsoon which starts from November until March every year. For residents in East Coast region, northeast monsoon is synonymous with flood. As the monsoon occurs on regular basis, it is not exaggerated to say that the people in Kelantan, Terengganu, Pahang and part of East Johor are used to this monsoon occurrence and the risk posed by the flood to lives and properties.
However, maybe due to global climate change, rapid urbanization, logging activities and uncontrolled deforestation in certain areas in the country, flood is no longer characterised by traditional geographical boundaries or seasons. Storms and floods can hit any area unexpectedly; and northeast monsoon season risk is not exclusive to East Coast states.
For instance, at the end of December 2021, several areas in Selangor, Pahang and Johor were badly hit by flood—something which is not usually anticipated to happen in west coast peninsular during northeast monsoon.
Flood when occurs can result in direct or indirect losses to lives and livelihoods. For example the economic losses from 2006 Johor flood were estimated at RM2.4 billion while the 2014 flood which dubbed as unprecedented and the largest recorded flooding event in the century—which Kelantan was the worst off among other states such as Terengganu, Pahang and Johor—displaced 541 896 people or equivalent to 2% of the Malaysian population; caused 25 casualties and destroyed 2076 houses while another 6696 were damaged. According to 2018 National Disaster Management Agency (NADMA) annual report, the damage caused by the 2014 flood were estimated at RM2.9 billion.
For the recent floods which occurred at the end of 2021, the Department of Statistics in its special report revealed that the overall losses incurred by the affected states were RM6.1 billion. The figure is equivalent to 0.4 percent of the country’s nominal Gross Domestic Product (GDP). By category, public assets and infrastructure recorded the highest loss of RM2 billion followed by housing (RM1.6 billion) and vehicles (RM1 billion). Manufacturing sector, business premises and agriculture sector are not spared as the combined losses suffered by these sectors stood at RM1.49 billion. In the most affected state alone i.e. Selangor, the loss for residential and vehicles amounted to RM1 billion and RM855 million respectively. Pahang comes second with RM425.6 million and RM78.2 million of the both categories respectively.
For the victims, restoring life back to normal after houses, vehicles, livelihood etc. had been washed away or submerged in flood water is not an easy task. Post flood recovery requires both financial and non-financial elements. In terms of financial aid, even though the government had introduced Malaysian Family Flood Relief (Bantuan Banjir Keluarga Malaysia) package amounting to RM1.4 billion which included cash and voucher assistance for home and vehicle repairs; and interest free loans to help ease the burden of the affected householders; micro, small and medium enterprises (MSMEs); informal entrepreneurs and even paddy farmers, it would still not be able to cover for a full loss and costs suffered. However those with takaful or insurance flood cover would find some additional relief from the compensation payable in respect of the insured’s loss or damage caused by the flood.
Unfortunately, according to a survey conducted by Zurich Malaysia in September 2021 involving 1201 respondents nationwide, only 26% of Malaysian house owners are covered for flood. In other words, despite regular flash floods and cyclical monsoon seasons; 74% of homes in Malaysia are not covered for flood. The survey also revealed that 59% of homeowners are not covered for fire damaged. Based on Malaysia Property Market Centre (NAPIC), there are about 5.8 million residential properties in Malaysia. This means that more than half of the overall homes in the country are not covered by takaful or insurance against potential damages. Such damages can be caused by many factors like fire, lightning, gas explosion, storm, landslide, flood etc.
Meanwhile, statistics by the Insurance Service Malaysia (ISM) showed only 4% of motorists chose comprehensive policies which have flood covers in 2021. The data seems to concur with a report by a local online news portal which reported the claim by most motor workshops in Shah Alam that less than 2% of the flood-damaged cars which have been sent for repairs are insured against special perils, which included floods. The costs of repair vary depending on the damage and the vehicle’s model. Normally it can break the bank of an average person as the cost to repair an Axia or Myvi could fetch between RM18 000 to RM22 000.
While in many European countries insurance is seen as a basic socioeconomic good, in Malaysia, the importance of having takaful and insurance covers; and in the context of this article—flood covers is still not very encouraging among citizens. This is evident from the aforementioned findings by Zurich Malaysia and the data compiled by ISM.
It is said that awareness is important when it comes to takaful and insurance coverage. In most cases, people only realise the importance of cover after they themselves experienced or witnessed a traumatic event. As time flies they tend to forget the experience and on renewal of the policies, they will discontinue the cover. This kind of mind set should change as takaful or insurance is not about prediction of what is to happen. It is rather an early effort taken to cover the unforeseeable loss which could happen over a period of our lives.
In Malaysia, there is no stand-alone takaful or insurance policy which offer flood covers to consumers. Currently, flood cover is optional and it is offered as an extension under motor (comprehensive) and fire (basic) policies subject to additional contribution or premium. Besides motor and fire policies, the cover could also be included in house owner’s policy and householder’s policy.
As 9% of Malaysia’s total land is flood-prone areas and 4.8 million people in Malaysia live in areas at risk of flooding, combined with climate change, equatorial climate and monsoon seasons; flood should be a matter of great concern for all of us. As such, it is wise to adequately insure our property and belongings because it helps minimise the financial impact of such a peril should it arise.