KUALA LUMPUR: Life insurance provider AIA Bhd sees the takaful segment as one of the key growth drivers of the company in 2015. It hopes to expand its footprint in the market through the launch of new syariah products.

AIA chief executive officer Bill Lisle said there is huge untapped potential in the Malaysian takaful market as the penetration rate currently stands at 15%.

“About 68% of the population is bumiputera, and only around 15% of that population has any type of protection. We see takaful as being one of the key growth drivers, not just for AIA, but for the industry as well,” Lisle told a media briefing on its financial results for the year ended November 2014 (FY14), yesterday.

Currently, the takaful segment contributes around 10% to 15% of AIA’s business.

Lisle said AIA is already integrating its takaful products into the mainstream, providing both conventional and syariah solutions to all its customers.

“One of the key differentiators for AIA is, when we come to design our products for takaful we make them very similar to conventional products, with obviously just the syariah investment strategy at the back end slightly different,” he said.

This, he added, makes it easier for customers to understand the products. Comparatively, other insurance companies have two very different conventional and takaful products, he said.

The expansion of its takaful segment is in line with the insurance provider’s bid to capitalise on the wide protection gap in Malaysia, which is worth approximately RM1.1 trillion.

“There still exists a large protection gap here, with the latest statistics pointing to an average sum assured per person of RM38,500, whereas it should be in the region of RM200,000,” said Lisle, adding that the current penetration rate of 54% is still far from the government’s 75% penetration target by 2020.

The company is also nearing the completion of its integration with ING Group’s operations, following the acquisition of the former by AIA’s parent company, AIA Group Ltd, in 2013. The group is targeting full integration by mid-2015.

On the upcoming goods and sevices tax (GST), AIA said it will not be re-pricing the prices of its products post-GST at this juncture. 

However, while there will not be a re-pricing, the company said GST will be charged on the premiums for medical, critical illness, personal accident and general insurance policies.

GST will also be charged on the monthly cost of insurance (COI) for investment-linked policies and riders under the medical, critical illness and personal accident categories, and also on all fees and charges relating to administrative services.

For FY14, the company posted a 12% year-on-year (y-o-y) growth in operating profit before tax of RM1.02 billion, driven by underlying business growth and better product profitability.

The company saw an increase of 34% in the value of new business (VONB) from a year earlier, while takaful VONB grew by more than 50% y-o-y.

Its investment-linked segment saw a 38% y-o-y expansion in VONB, while its group insurance business registered 60% y-o-y VONB growth, supported by the launch of A-Health Maximiser, its pre-retirement health product.

“AIA Malaysia’s outstanding results, which follow an equally strong financial performance in 2013, are a clear indication that our business transformation strategy and focused execution are delivering the desired results,” said Lisle.

This article first appeared in The Edge Financial Daily, on March 17, 2015.