Malaysia's insurance industry has been growing at a rapid pace in the past decade following strong economic growth that has led to rising income and living standards among the population. Malaysia's insurance industry is one of the key drivers of the services sector. A general breakdown indicates that the country's finance and insurance industry accounted for 20.1% of the services sector's output in 2011 as well as 11.8% of the country's GDP.
Life insurance new business premiums have expanded at a compounded average growth rate (CAGR) of 9.4% between 2000 and 2011, growing from merely RM2.9 billion to RM7.9 billion. Gross direct premiums of general insurance, grew at a more moderate pace between 2000 and 2011, expanding by a CAGR of 7.8% and rising from RM5.9 billion to RM13.6 billion.
Growth of the Takaful industry was also phenomenal in the past several years. Its new business family contributions have grown by 20.2% per annum on a CAGR basis between 2003-2011, compared with a CAGR of 6.3% per annum for conventional new business premiums. Similarly, for general insurance, Takaful's gross direct contributions surged from RM551 million in 2005 to RM1.6 billion in 2011, rising by a CAGR of 19.4% per annum, compared with a 6.4% per annum growth on a CAGR basis for the general conventional gross direct premiums within the same period.
Further, insurance industry players are encouraged by the Government's proposal to remove 8% investment income tax on deferred annuity. The Life Insurance Association of Malaysia (LIAM) ensured that this move would act as a major boost in retirement planning for Malaysians. In the Budget of 2013, the Government had also proposed to introduce insurance schemes for hawkers, small business owners, farmers and fishermen, with total yearly allocation amounting to about RM298million.
The Government proposed a group insurance coverage scheme of RM5,000 for hawkers and small business owners registered with the Companies Commission of Malaysia. The Government will allocate RM16mil a year under the scheme. For fishermen, the Government introduced a scheme with a RM100,000 maximum coverage, and an allocation of RM230mil in 2013 as an incentive for fish landing as well as payment of living allowances for the fishermen. Another group insurance coverage scheme of up to RM15,000 will be allocated for almost 242,000 armed forces and police personnel. The Government will also provide insurance coverage of up to RM100,000 for all school children travelling by school buses with permits, in the event of accidents.
Going forward, the outlook for Malaysian insurance industry looks very promising. Premiums in both life and general segments are expected to increase at respectable rates in line with economic growth. The life insurance segment will benefit from the rising per capita income of the population as well as new and innovative products introduced by insurance companies. Assuming that nominal GDP growth will expand at an average 8% per annum in the next few years, it is estimated that life new business premiums will reach RM10.2 billion in 2012 and RM13 billion in 2015. For general insurance, softer growth is expected in some sub-segments.
(Source: Insight Alpha)