Life insurance Malaysia Todate

Life insurance is an important method of financial protection. Life insurance business in Malaysia is mostly owned by foreign entities. Only four locally-owned entities, namely, Etiqa Life Insurance Berhad, Hong Leong Assurance Berhad, Axxa Affin Life Insurance Berhad and Sunlife Malaysia Assurance Berhad.

Government offers various incentives - ie income tax charged for life insurance business has been kept relatively low, as little as 8%, as opposed to other nature of businesses, at about 24%, income from the sale of policies, i.e. premiums received by life insurance companies, is also not taxable and personal relief to life policy buyers, up to a maximum of RM3,000.

Since 2018, Bank Negara Malaysia requires all insurance companies and takaful operators in Malaysia to distinguish and keep their life insurance business and general insurance separate. 

Gross Income - for the period between 2018 and 2020, life insurer collected a total gross income of RM29 billion in 2018, of which RM25 billion was from foreign-owned companies, and RM4 billion from locally-owned companies. 

For 2019, the gross income from life insurance companies showed a sharp increase of RM44 billion, of which RM35 billion was contributions from foreign-owned companies, and RM8 billion from locally-owned life insurance companies.

Whereas for 2020, there was a slight decrease in gross income amounting to RM42 billion, of which RM8 billion was from locally-owned companies, and the rest from foreign-owned companies albeit the Covid-19 pandemic towards the end of 2019. 

From the total gross income reported, the largest contribution to life insurance companies was from the sale of policies or premiums. A total of RM29 billion was received for 2018 and 2019, while there was an increase for 2020 of RM31 billons.

Policies Sold - The percentage of sales for foreign-owned companies showed a downward trend, from 86% in 2018 to 81% in 2020, while locally-owned companies reflected an increase in policy sales, with 14% for 2018 and 19% for 2020.

Only 4% of reinsurance policies have been purchased by life insurance companies. This indicates that life insurance companies have a high ability to pay claims in the event of an insured risk.

Malaysian Financial Reporting Standards (MFRS) 17 - The insurance industry in Malaysia is constantly changing and growing. Among the challenges that they will face is the introduction of the Malaysian Financial Reporting Standards (MFRS) 17 to replace MFRS 4, which will come into effect in 2023.

All parties, especially insurance companies and enforcers, mainly Bank Negara Malaysia and Inland Revenue Board (IRB) need to play their respective roles more efficiently and effectively to ensure MFRS 17 is in line with existing laws and provisions.