Malaysia: Insurance market growth forecast to be stable this year
Source: Asia Insurance Review | Apr 2019
General insurance premiums in Malaysia are expected to stay stagnant in view of the progressive impact of tariff liberalisation and as the country’s economic growth moderates, says RAM ratings which is maintaining a stable outlook on the local insurance industry for this year.
Similarly, life insurance new business premiums are expected to chart a modest 1%-2% rise, given weaker consumer sentiments and rising cost of living concerns.
General insurance premiums rose 1.8% to MYR17.6bn ($4.3bn) in 2018 after a mild contraction the year before, supported by growth in the motor as well as medical and personal accident segments. While fire premiums also saw an increase, future growth will be limited as competition intensifies in this high-margin segment.
At this juncture, insurers’ pricing autonomy is still limited, although the regulator may consider further easing from 2019 onwards. Motor and fire insurance collectively accounted for 67% of general insurance premiums in 2018.
The life insurance segment’s new business premiums expanded a slower 1.8% to MYR10.3bn in 2018 (2017: +3.9%), driven by an increase in group policies. However, new business growth may be constrained in the next few years as the industry adapts to new regulatory requirements for investment-linked (IL) business. Among others, the revised guidelines require sustainable premium pricing, sustainability tests of insurance coverage, and more conservative investment return illustrations in sales and marketing materials. IL sales contributed 44% of the sector’s new business premiums last year.
RAM Ratings says the nation’s favourable demographics and healthcare inflation will still buoy demand for insurance coverage in the medium term. Additionally, the Budget 2019 separation of tax relief for Employee Provident Fund contributions and life insurance premiums may boost awareness, alongside government initiatives such as the recent mySalam national health protection scheme. A