PETALING JAYA: The life insurance coverage sector’s new enterprise premiums are anticipated to develop by a minimum of a single digit and as much as 10% this yr, however the uneven financial restoration.
Last yr, new enterprise premiums grew barely greater by 12%. New enterprise premium is the premium acquired from new insurance policies for a specific yr.
RAM Rating Services Bhd co-head of economic establishment rankings Sophia Lee advised StarBiz that new enterprise progress within the life sector could are available at 10% this yr in contrast with 12% final yr.
She attributed this to wholesome demand for insurance coverage coverage and higher consciousness of safety gaps, significantly within the aftermath of a well being disaster.
The nation’s beneficial demographics and eager curiosity in medical coverage amid excessive healthcare price inflation are nonetheless key structural progress components in the long term.
RAM Ratings co-head of economic establishment rankings Sophia Lee
Lee stated, “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 stay sufficient this yr. Last yr, the capital adequacy ratio (CAR) stood at 212% as at end-December 2021.
Overall new enterprise era of the life and household takaful sector rebounded strongly to 12% and 29% respectively in 2021. In 2020, life insurance coverage new enterprise premiums contracted by 3%, whereas household takaful noticed a 7% progress.
As the sector rides the restoration wave, new enterprise progress for life and household takaful gamers may are available at a respective 10% and 20% this yr, Lee added.
On the entire, RAM has maintained a steady outlook on the life and normal insurance coverage sectors. It expects each sectors to stay resilient regardless of anticipated volatilities on the funding entrance and the normalisation of claims expertise because the nation transitions to endemicity.
Life Insurance Association of Malaysia (Liam) president Loh Guat Lan stated she is optimistic on the efficiency of the life insurance coverage sector this yr.
She attributed this to, amongst others, the reopening of the financial sectors and the federal government’s proactive measures in offering social safety to the B40 section via the Perlindungan Tenang Voucher (PTV) programme.
Barring unexpected circumstances, the trade foresees a single-digit progress in its new enterprise premiums for 2022, she stated.
LIAM president Loh Guat Lan
As of end-December 2021, over 1.7 million vouchers value over RM85mil had been redeemed by the Bantuan Prihatin Rakyat recipients underneath the RM50 PTV. As for the RM75 PTV, as of June 30, 2022, over 2.8 million vouchers value over RM212mil had been redeemed by the Bantuan Keluarga Malaysia recipients.
She expects Perlindungan Tenang merchandise, which cater to the lower-income group, and ILPs to do effectively this yr.
“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 famous.
Meanwhile, on the final insurance coverage facet, Lee stated the final insurance coverage sector’s gross premiums progress is anticipated to stay subdued at a low to mid-single digit stage, albeit at an bettering fee (2021: 2.4%).
She stated the gradual financial restoration will help premium progress, which is prone to be anchored by the motor and fireplace courses – the 2 largest segments within the normal trade.
“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 whole claims ratio (claims ratio and fee and administration expense ratio) for the final insurance coverage sector final yr stood at 86%, which was decrease than 90% and 93% in 2020 and 2019 respectively.
The fireplace class remained the second-largest section for normal gamers after motor, accounting for 20% and 50% of combination normal premiums and takaful contributions in 2021, respectively.
The non-life sector’s premiums and takaful contributions grew 4% to RM21.5bil final yr (2020: 0%; 2019: 2%).
