The insurance industry is expected to maintain its growth momentum this year, in line with developments undertaken to ensure the industry remain efficient and robust in tandem with the underlying economic trend, according to the Bank Negara Insurance Annual Report 2002. These developments included the consolidation of the industry through mergers and acquisitions, good governance practices, professionalism of the sales forces as well as operational flexibility of business processes, the central bank said. In line with the improved economic situation, the combined income of the life and general businesses increased by 14.3% to RM16.8bil last year from a year earlier. Life and general business recorded premium growth of 16.2% and 10.9% respectively. If the annuity business was included, the combined premium income of the insurance industry declined by 1.6% to RM16.8bil, due to the suspension of the Employees Provident Fund Annuity Scheme towards end-2001.

As a result, the total premium income of insurance as a proportion of nominal Gross National Product decreased marginally to 5% last year compared with 5.5% in 2001. For the year under review, total benefits and net claims paid by the industry increased by 18.8% to RM7.6bil, representing 45.3% of premium income. The increase was mainly due to a larger payout of maturity benefits for life policies. The industry's insurance funds assets increased by 11.3% to RM66.6bil last year from a year ago, accounting for 4.8% of the total assets of the financial system. The life insurance industry, excluding the annuity business, recorded new premium growth of 25.5% to RM3.56bil last year, attributable to the promotion of investment-linked products and other savings plans. Including the annuity business, the life insurance industry recorded a drop in new business last year by 32.2% to RM3.6bil compared with the unprecedented growth of 54% in 2000 and 78.4% in 2001 due to discontinuation of the annuity business.

Last year, new sums insured and the number of new policies issued increased by 9.1% and 0.8% to RM140.7bil and 1.4 billion policies respectively. In terms of new business portfolio, investment linked and endowment policies achieved an impressive growth of 110.1% and 25.2% respectively while annuity and whole life policies declined by almost 100% and 11.6% respectively. The endowment and investment-linked business together accounted for 53% of the new business market of the life insurance industry. Total assets of life insurance funds registered a slower growth of 14% to RM51.2bil last year.

On the performance of general business, Bank Negara said the gross direct premiums rose by 15.4% to RM7.4bil, compared with an increase of 8% in 2001. Besides improved business performance, the increase in gross direct premiums was due to higher premium rates, which rose in tandem with the hardening of rates in the global markets. The increase in premium rates was particularly evident in the marine, aviation, and transit sector, which saw an increase of 60.3% in gross direct premiums compared with increases of less than 5% in the previous few years. Total assets of the general insurance funds grew at a slower pace of 3.2% to reach RM15.4bil this year from RM14.9bil a year earlier.