Tuesday May 29, 2012
Life insurance sector may grow 10% this year
By SHARIDAN M. ALI
KUALA LUMPUR: Banking on economic growth of the region, which is currently at the forefront of global fiscal environment, Malaysia's life insurance industry is expected to grow by 10% this year.
Bank Negara assistant governor Donald Joshua Jaganathan said Asia was at the forefront of global economic growth, with projected gross domestic product expansion of 7.3% to 7.9% in the next two years, and this would bode well for insurance market in the region.
“It has been forecast that premiums in emerging Asia could potentially grow 9.5% and 11.5% for the life and non-life market respectively,” he said.
Jaganathan said The Life Insurance Association of Malaysia had projected that the local life insurance industry could grow up to 10% this year.
“The general insurance sector too, which is closely linked to the economy, is expected to demonstrate strong growth,” he said in his keynote address at the opening of the International Claims Convention 2012,” he added.
“A key driving factor of these trends is the large and growing middle-income population in the region with higher levels of disposable income and who are also financially literate,” he added.
Jaganathan said another important factor that would contribute to the growth of the insurance sector was demography, as some parts of the region would face an ageing population in years ahead.
“Malaysia is expected to see a four-fold increase in the proportion of elderly population to 16% of the total population. This will create higher levels of demands for retirement and health insurance products,” he said.
Malaysian Insurance Institute (MII) chief executive officer Khadijah Abdullah said the life insurance sector in Malaysia paid out a total net benefit of RM9.9bil in 2011, an increase of 9.6% from 2010.
“The general insurance sector paid out RM6.2bil, an increase of 1.6% (over the same period),” she said in her welcoming remarks read by MII senior vice-president of education and life insurance training, Mohd Taipor Suhadah.
She said for the general insurance sector in Malaysia, motor claims remained the highest, followed by medical claims.
“To combat the escalating claims costs, cooperation from insurers, third-party administrators, adjusters, providers and consumers are important.
“Having a world-class claims management system would not solve the issue if the problems at the grassroots are not properly addressed. Hence, you would notice that in this convention, we have topics on motor, fraud and consumer awareness,” she said.
Malaysian Insurance and Takaful Brokers Association deputy chairman Raja Azlan Putra Raja Datuk Seri Azam foresaw that the industry would consolidate further as the country opened its door to foreign companies.
“We need to merge to be more competitive in terms of size or increase our capital. The mergers are already beginning in small stages,” he said.
Consolidation in the insurance industry picked up a few years ago, spurred by Bank Negara's move to introduce risk-based capital framework which imposes a minimum 130% supervisory capital-adequacy ratio on insurance companies.
The Government had also liberalised foreign ownership in 2009 by raising foreign shareholding cap to 70% from 49%, further opening up local insurers to merger and acquistion opportunities by international insurance companies.