Life insurance industry projects moderate growth

MALAYSIA'S life insurance new business premium is anticipated to moderately grow between 14 per cent and 15 per cent this year, compared with the lower double-digit growth in 2011.

The Life Insurance Association of Malaysia (Liam) believes that growth would hinge upon several market opportunities.

"Among the factors (for growth) are the current low penetration rate of life insurance at about 42.83 per cent, which would spur internal market demand, the government's Economic Transformation Programme and higher tax incentives for retirement products that would provide a platform for growth of the life insurance sector," it told Business Times.

It also added that the new private retirement scheme administrated by the Securities Commission of Malaysia would be a source of growth in the coming year.

In the first nine months of 2011, the life insurance industry delivered a moderate performance with new business sales growth of 8 per cent on weighted premium basis.

The growth was contributed by a positive performance in regular premium sales which went up by 13 per cent as compared to the same period in 2010.

By class of business, investment-linked business continued its strong growth momentum in 2011.

The sale of regular premium investment-linked insurance plan increased to RM752 million in the first half of 2011 from RM597 million in the corresponding period in2010 with a growth rate of 26 per cent.

Meanwhile, for single premium business, there was a 16 per cent growth in investment-linked plans.

Liam expects retirement-related products, medical and protection-related products to do well this year.

"While insurance companies fortify their grip on the market, distribution channels play a significant role in boosting sales," Liam said.

As part of Liam's five-year strategic plan, the association said it will continue to drive its consumer education programme and raise awareness of the virtues of life insurance, especially the need for savings and protection to boost the level of insurance penetration in the country.

"In an environment of high inflation, it will bring about the question of how much disposable income is available and how much should put aside. Such a situation usually results in an increased demand for financial planners as clients become more sophisticated and highly demanding," it said.

On the ongoing Eurozone and the US debt worries, Liam noted that the industry would be able to sustain if an economic downturn happens as proven during the 2008/2009 global credit crunch.

Back then, despite tough conditions, the life sector recorded positive growth albeit lower figures mainly due to the fact that the domestic financial system has sufficient buffers in place with sound risk management system as well as adequate levels of capital to alleviate any effects from untoward global economic slowdown.