Life insurance industry sees single digit growth in 2016

Life Insurance Association of Malaysia president Toi See Jong

KUALA LUMPUR: The life insurance industry is expected to achieve a moderate single-digit growth in 2016 in view of the challenging environment.

“On the outlook for 2016, given the uncertainties faced by the global and local economies, counter-balanced by the low insurance penetration rate in Malaysia, it is expected that industry will achieve a moderate single digit growth,” according to Life Assurance Association of Malaysia (LIAM) Life Insurance Association of Malaysia (LIAM).

In 2015, the life insurance industry recorded a growth of 6.2% to RM1.24 trillion from RM1.17 trillion in 2014 in sum assured for all policies combined in 2015.

President Toi See Jong said the healthy performance of the life insurance industry reflected the continued increase in awareness among Malaysians on the importance of insurance protection.

As a whole, the life insurance industry provided protection to 12.5 million lives (multiple policies are considered separate) in 2015, an increase of 129,015 compared with the preceding year. The per capita sum assured also increased to RM39,929 in 2015 from RM38,075 in 2014.

The increase in the number of lives covered by life insurance and higher sum assured protection show there is an increase in awareness among Malaysians on the importance of life insurance protection. 

However, LIAM said the per capita sum assured of RM39,929 was still “way below the amount needed” to support one family member in the event of the death or disability of the breadwinner. 

Based on the 2012 Underinsurance Study in Malaysia undertaken by University Kebangsaan Malaysia and LIAM in 2013, the average mortality gap for each member of a family is about RM100,000 to RM150,000.

“Recognising this, the industry together with LIAM, will continue to step up efforts and intensify the various consumer awareness campaigns and promotional activities to further increase the awareness level among all Malaysians and reduce the insurance protection gap,” Toi said.

Based on preliminary figures, the life insurance industry in Malaysia grew by 4.3% in 2015, as measured by new business APE (Annual Premium Equivalent = 10% Single Premium + 100% Annualised Premium). The new business total APE in 2015 was RM4.91bil, as compared with RM4.71bil in 2014.

Group insurance business achieved a strong growth rate of 15.8% in 2015. 

In terms of individual business, traditional policies regained its popularity, outpacing investment-linked business by growing at 5.2% as compared with a growth rate of 2.3% achieved by the latter.

On new business total premium basis, the industry grew 1.8% in 2015 with total premium volume recording RM9.12bil.

The total premium for in-force policies grew moderately at 6.6% in 2015 for individual and group policies combined.

The life insurance industry also registered an increase of 9.0% in claims payouts amounting to RM9.2bil contributed mainly by higher medical claims. The industry as a whole registered slightly lower disability claims payouts in 2015 while death claims increased moderately at 8.9% in line with the increase in in-force sum assured.

LIAM remained optimistic that the life insurance industry was resilient to economic pressure as there was still a big gap in life insurance coverage in Malaysia. 

In addition, the strong focus by Bank Negara Malaysia and the industry to increase the insurance penetration rate as well as the Life Insurance and Family Takaful Framework (LIFE Framework), which came into force on Nov 23, 2015 will drive growth and change the landscape of the insurance industry in the near future.

“We believe that the various initiatives within the three pillars in LIFE Framework will have significant impact on the life insurance industry. The encouragement of alternative distribution channels will have a huge impact in expanding the reach and penetration of insurance in Malaysia. 

“The opportunities in the digital and direct channels, will not only improve transparency and enable easier product comparisons, but also increase the reach and penetration of insurance among the new generation of consumers who are more educated and IT savvy,” Toi added.

“The introduction of the balanced score card is expected to improve the productivity and professionalism of insurance agents, and in turn will also further enhanced the brand image and the attractiveness of the insurance industry, which augurs well for the industry to meet the Government’s vision of achieving 75% penetration rate by 2020 and reduce the protection gap among Malaysians.”
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