LIAM’s president Vincent Kwo Shih Kang opined the reason being the low interest rate environment is pushing consumers who are willing to take on more risks in order to get higher returns, and investment linked policies with its savings and protection elements present the freedom for consumers to choose their investment mix.
“With the recent new highs achieved in the local stock market, those policyholders opting for a higher equity component in their portfolio have achieved a decent return,” said Kwo.
The investment-linked new business recorded a growth of 4.8% for 1H while the traditional life business contracted 15.5% during the same period.
Investment-linked policies continued to outshine traditional policies in terms of growth with 49.5% of new business share in 2012, up from 45.6% in 2011.
Nonetheless, for new business premiums, the life insurance industry recorded a 5.9% decline on a weighted premium basis (commonly adopted method for measuring new business volume by adding 10% of single premium business to 100% of regular premium business) during the 1H13 to RM1.85 billion from RM1.97 billion recorded a year before.
“The overall new business performance of the industry experienced some adjustments due to portfolio restructuring that was undertaken by some of the industry players,” said Kwo.
The statement added that the total claims payout for the industry eased slightly to RM2.9 billion for 1H13 as compared to RM3.1 billion in the corresponding period last year.
A total of RM6.7 billion worth of life insurance claims were paid in 2012, a 19% increase over RM5.6 billion paid in 2011.
Kwo pointed out the penetration rate is at 41.22 % presenting a growth opportunity for the industry especially in line with the Economic Transformation Programme targeting 75% of the population to be insured by the year 2020.
Total sum insured for 2012 was RM1.02 trillion, an 8% increase over RM946 billion in 2011 while the average sum insured was RM34,700, and increase of 6.7% from RM32,533 in 2011, said LIAM in an earlier report.
The average sum insured of RM34,700 per capita against an ideal average sum insured per person should be around RM310,000 also presents growth opportunities for the industry.
Commenting on the 2H13, Kwo believes that the industry will bounce back and should be able to deliver a positive growth of 2%-5% for the whole of 2013.
It is customary for insurance companies to register a high new business premium figure for the final quarter of the year as agents would be selling more policies in that quarter in order to meet their quotas.
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