Strong demand for coverage


PETALING JAYA: The life insurance sector’s new business premiums are anticipated to grow by at least a single digit and up to 10% this year, notwithstanding the uneven economic recovery.

Last year, new business premiums grew slightly higher by 12%. New business premium is the premium acquired from new policies for a particular year.

RAM Rating Services Bhd co-head of financial institution ratings Sophia Lee told StarBiz that new business growth in the life sector may come in at 10% this year compared with 12% last year.

She attributed this to healthy demand for insurance coverage and greater awareness of protection gaps, particularly in the aftermath of a health crisis.

The nation’s favourable demographics and keen interest in medical coverage amid high healthcare cost inflation are still key structural growth factors in the long run.

RAM Ratings co-head of financial institution ratings Sophia LeeRAM Ratings co-head of financial institution ratings Sophia Lee

Lee said, “We expect investment-linked plans (ILPs) to retain their popularity among life insurers, mostly due to insurers’ preference for marketing such products, given their capital efficiency as well as individuals looking for alternative investments amid the low interest rate environment.

“Despite our expectation of new business growth, the profitability of life players in 2022 will stay pressured by volatilities in the financial markets, given the uncertainties on the external front, including the Russia-Ukraine war and expected interest rate hikes in advanced economies that could affect their investment portfolios.”

However, she expects the sector’s capitalisation to remain adequate this year. Last year, the capital adequacy ratio (CAR) stood at 212% as at end-December 2021.

Overall new business generation of the life and family takaful sector rebounded strongly to 12% and 29% respectively in 2021. In 2020, life insurance new business premiums contracted by 3%, while family takaful saw a 7% growth.

As the sector rides the recovery wave, new business growth for life and family takaful players could come in at a respective 10% and 20% this year, Lee added.

On the whole, RAM has maintained a stable outlook on the life and general insurance sectors. It expects both sectors to remain resilient despite anticipated volatilities on the investment front and the normalisation of claims experience as the country transitions to endemicity.

Life Insurance Association of Malaysia (Liam) president Loh Guat Lan said she is positive on the performance of the life insurance sector this year.

She attributed this to, among others, the reopening of the economic sectors and the government’s proactive measures in providing social protection to the B40 segment through the Perlindungan Tenang Voucher (PTV) programme.

Barring unforeseen circumstances, the industry foresees a single-digit growth in its new business premiums for 2022, she said.

LIAM president Loh Guat LanLIAM president Loh Guat Lan

As of end-December 2021, over 1.7 million vouchers worth over RM85mil were redeemed by the Bantuan Prihatin Rakyat recipients under the RM50 PTV. As for the RM75 PTV, as of June 30, 2022, over 2.8 million vouchers worth over RM212mil were redeemed by the Bantuan Keluarga Malaysia recipients.

She expects Perlindungan Tenang products, which cater to the lower-income group, and ILPs to do well this year.

“The demand for ILPs has been on the uptrend and the industry has also grown significantly, overtaking the life insurance traditional business.

“ILPs have been popular since their introduction in 1999. The flexibility in the product design makes ILPs very attractive for young people to buy an insurance policy that provides protection, medical coverage as well as savings/investments.

“All life insurance companies now offer ILP products. About 70% of medical and health insurance plans are sold together with ILP products,” Loh noted.

Meanwhile, on the general insurance side, Lee said the general insurance sector’s gross premiums growth is expected to remain subdued at a low to mid-single digit level, albeit at an improving rate (2021: 2.4%).

She said the gradual economic recovery will support premium growth, which is likely to be anchored by the motor and fire classes – the two largest segments in the general industry.

“Notably, recent flood events could spur the take-up of flood and special perils (natural disaster) cover as well. Nonetheless, the sector’s underwriting performance could weaken this year as claims begin to normalise upward, especially from the motor class (on the back of increased road activity) and the medical segment (as previously deferred non-critical medical procedures pick up pace).

“With a CAR of 261% as at end-December 2021, the general insurance industry remains well-capitalised,” she added.

The total claims ratio (claims ratio and commission and management expense ratio) for the general insurance sector last year stood at 86%, which was lower than 90% and 93% in 2020 and 2019 respectively.

The fire class remained the second-largest segment for general players after motor, accounting for 20% and 50% of aggregate general premiums and takaful contributions in 2021, respectively.

The non-life sector’s premiums and takaful contributions grew 4% to RM21.5bil last year (2020: 0%; 2019: 2%).

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LIAM , Loh Guat Lan , insurance , life ,


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