This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on Feb 29 - March 6, 2016.
The Malaysian life insurance industry recorded a 6.2% growth in sum assured for all policies combined in 2015, amounting to RM1.24 trillion. This compares with RM1.17 trillion in 2014, according to a statement by the Life Insurance Association of Malaysia (LIAM).
As a whole, the industry provided insurance protection for 12.5 million lives last year, or 129,015 more than the previous year. The per capita sum assured increased from RM38,075 in 2014 to RM39,929 last year.
According to LIAM president Toi See Jong, the healthy performance of the life insurance industry reflects the continued increase in awareness among Malaysians of the importance of insurance protection.
Nevertheless, the per capita sum recorded is still considered low as it is way below the amount needed to support a family member in the event of death or disability of the breadwinner. Based on the 2012 Underinsurance Study in Malaysia by Universiti Kebangsaan Malaysia and LIAM in 2013, the average mortality protection gap for each member of a family is about RM100,000 to RM150,000.
Claim payouts saw an increase of 9% last year, amounting to RM9.2 billion compared with RM8.4 billion in 2014, mainly attributed to higher medical claims. Disability claims were slightly lower, while death claims rose 8.9%, in line with the increase in in-force sum assured.
Moving forward, LIAM remains optimistic that the life insurance industry will be resilient to economic pressures despite a challenging external environment as there is still a big gap in life insurance coverage in Malaysia.
The strong focus by Bank Negara Malaysia and the industry to increase the insurance penetration as well as the Life Insurance and Family Takaful Framework (LIFE Framework), which came into force last November, will drive growth and change the industry’s landscape in the near future, the association says.
“We believe the various initiatives within the three pillars of the LIFE Framework will have a significant impact on the life insurance industry. The encouragement of alternative distribution channels will have a huge impact on the industry’s reach and penetration in Malaysia,” says Toi.
The digital and direct channels, he adds, will not only improve transparency and enable easier product comparisons but also increase reach and penetration among the newer generation of consumers, who are more educated and IT savvy.
On the outlook for 2016, given the uncertainties faced by the global and local economies and counter-balanced by the low insurance penetration rate in the country, the industry is expected to achieve a moderate single-digit growth.