Takaful - 20% Growth

After a slowdown in the first quarter, the life insurance sector is expected to pick up steam for the remaining year underpinned by strong demand for specific products, good economic growth and a relatively low penetration rate of insurance in the country.

Life Insurance Association of Malaysia (LIAM) president Vincent Kwo said despite the overall slowdown in new business, investment-linked policies bucked the trend with an overall positive growth of 4.1% in the first quarter this year.

Overall, he said traditional policies continued to be slightly more preferred by consumers than investment-linked business with a take up ratio of 50.6% to 49.4% in the first quarter compared with 52.9% to 47.1% for traditional and investment-linked policies respectively in the same quarter last year.

In retrospect, for 2012, the growth of the industry was underpinned by a solid performance in the investment-linked business, which grew by 20.9%. Investment-linked products are more flexible and provide better transparency and are increasingly becoming consumers’ preferred choice.

For 2013, LIAM anticipates new business to expand at a rate of about 10%, taking into consideration the projected economic growth rate of about 5%. Based on the data as at February 2013, new business’ total premium in 2012 was RM8.20bil compared wiith RM7.92bil in 2011.

Ernst & Young Malaysia partner (assurance) Brandon Bruce Sta Maria said life insurance had room for continued growth as the penetration rates for life insurance was lower compared to more matured markets such as Singapore and South Korea, adding that he expected the industry to maintain at least an equal growth rate compared to last year.

“New business growth in 2012 was about 2.2% but given the continued strong performance of investment-linked products and the roll-out of more annuity-type products to take advantage of the tax reliefs introduced during the last Budget, the industry should be able to maintain a steady growth for 2013,” he noted.

For the general insurance industry, Sta Maria said he expected premiums to continue to exceed prior year’s expectations due primarily to increased economic activity and growth.

This, he said, would be further enhanced by the expected increase in new motor premiums and the effects of the gradual increase in motor tariff premiums.

For takaful, he said Malaysian industry players remained confident that they would be able to continue to record more than 20% growth in 2013 in line with prior year’s achievements, although on a global scale, contribution growth was at a decelerated rate of about 18% for 2011.