This article first appeared in The Edge Financial Daily on March 19, 2019

KUALA LUMPUR: The Malaysian takaful industry is expected to experience near-term moderation, on the back of moderating economic growth and the progressive impact of tariff liberalisation, said RAM Rating Services Bhd.

However, the long term growth prospects for the industry remain anchored by Malaysia’s supportive demographics, low penetration rates and awareness initiatives targeted at the Muslim-majority mass market, said RAM.

For 2019, RAM has published a stable outlook on the takaful industry, which currently represents 17% of the combined insurance and takaful segment’s total premiums and contributions.

In particular, general takaful contributions are expected to expand at a slower 6% to 7% in 2019, RAM said in a statement yesterday.

This compares with an 8% increase in 2018 to RM2.8 billion, which was faster than the 6.3% achieved in 2017.

“All major business lines charted growth with motor taking the lead (+13.4%), followed by medical and personal accident coverage (+7.3%), and fire plans (+1.4%),” said RAM.

“Meanwhile, family takaful new business growth is expected to decelerate to 7% to 9% given weaker consumer sentiments and rising cost of living concerns,” it said.

Comparatively, new contributions in the family takaful segment grew 13.1% in 2018 to RM4.9 billion from a growth of 10% in 2017, spurred by the growth of ordinary family products.

“An anticipated moderation in private consumption growth may tamper with near-term demand, but the recently announced mySalam national health protection scheme which provides takaful coverage to the B40 lower-income group may act as a catalyst for future purchases of individual protection plans,” it said.