Takaful Durian Runtuh

Life insurers are eager to get a piece of the few hundred million ringgit business that will be offered to Islamic takaful insurance players to provide a RM30,000 protection against death or permanent disability for a RM50 contribution for each of the recipients of the government cash award as proposed in Budget 2014.

Based on a contribution of RM50 per insured with a total of about 7.9 million people to be covered under the Group Takaful Rakyat 1Malaysia (i-BR1M) scheme announced in the budget, takaful players can expect about RM395 million annual contribution under this scheme, which is expected to start next year.

Under the Budget 2014, the 1Malaysia People’s Aid (BR1M) to households with monthly income of RM3,000 and below will be increased from RM500 to RM650, while for single individuals aged 21 and above with a monthly income not exceeding RM2,000, the amount will be increased from RM250 to RM300.

Though lauding the move by the government, Life Insurance Association of Malaysia (LIAM), which represents the 14 conventional life insurance companies, hopes the scheme will be shared with its members and not exclusive to the takaful companies.

“It is further hoped that the government will also extend the i-BR1M protection scheme to all insurance companies so that the rakyat will have ample alternatives to choose from,” said LIAM president Vincent Kwo Shih Kang in a statement yesterday.

Kwo said life insurance companies with strong distribution channels will be able to provide their services to the people, especially those in the under served areas.

Though the government has not provided further details about the scheme — whether it is a personal accident product or a group term takaful product, whether one takaful company will underwrite the whole scheme or will it be shared, whether the takaful companies are sufficiently capitalised to undertake the risks — the news bode well for takaful companies and its future growth in Malaysia.

The BR1M programme, which was started in January involving a RM2.6 billion allocation, is expected to benefit 5.2 million households — about 80% of the total households in the country — with cash aid.

Calls made to takaful operators revealed that the news came as a surprise. “Our senior management is having a meeting about this,” said a representative of a takaful company who declined to be identified.

Malaysia Takaful Association, which represents the takaful industry, reported that family takaful registered new business gross contribution of RM3.5 billion in 2012, a 30% growth compared to the RM2.7 billion registered in 2011.

According to the Financial Stability and Payment Systems Report 2012 released by Bank Negara Malaysia in March 2013, the “total assets of takaful funds grew by 12.4% to RM19 billion, with total takaful contributions accounting for 13.6% of total premiums and contribution in the insurance and takaful industry”.

According to LIAM’s statistics as at December 2012, the Malaysian population was covered with RM1.02 trillion, 8% higher than the corresponding figure in 2011 of RM946 billion.

LIAM also noted that the life insurance industry registered a new business growth of 2.2% with RM4.3 billion weighted premium in 2012 compared to RM4.2 billion in 2011.