Insurance Sector Targets 9% Growth
The Star, Tuesday, December 9, 2008, PETALING JAYA: The local insurance sector is poised to improve in the next six to 12 months to chart a growth of between 8% and 9% next year despite the weak global economy, according to the Life insurance Association of Malaysia (Liam).
President Ng Lian Lu said he expected this year’s industry growth, in terms of annual new business premiums, to be around 7% to 8% compared with 9.4% in 2007.
“Historically, on average the life insurance industry growth will outpace the growth of the country’s gross domestic product (GDP) by two or three times.
“Since the Government has revised the GDP growth projection for 2009 to 3.5%, we are optimistic the industry will register high single digit growth of 8% to 9% next year,’’ he told StarBiz.
According to Ng, the financial turmoil and the credit crunch coupled with some large-scale retrenchment and recession in overseas countries had dampened consumer confidence.
Liam expects protection products (such as whole life, term and medical) and long-term savings products (education products and retirement products) to be less affected.
Investment-linked products on the other hand may lose favour with consumers while traditional products could make a comeback, he noted.
General Insurance Association of Malaysia (PIAM) executive director CF Lim said growth in the general insurance industry would moderate in the second half of next year.
There was, however, cautious optimism that growth prospects going forward would be very much in tandem with the general economic growth, he added.
The general insurance industry registered gross written premium growth of 3.91% in 2007 to about RM11.5bil.
For the period from January to June 2008, growth in gross written premium increased by almost 8% over the previous corresponding period to RM5.85bil.
ACE Synergy Insurance Bhd chief executive officer and managing director Rajbir Singh Nanra said the move by Bank Negara to provide bank deposit guarantees, the establishment of a RM200mil Micro Enterprise Fund to support small and medium enterprises and the availability of a liquidity facility to insurance companies would boost public and investor confidence.
The implementation of the risk-based capital framework next month would further strengthen the local insurance industry and raise the confidence level among policyholders, Rajbir said.
Allianz Malaysia Bhd chief executive Alexander Ankel said he believed that effective and sustainable cost management was vital for the success of insurers in these trying times.
The trends that would most likely surface in this challenging period would revolve around the issue of cash before cover (CBC) and collection, he said.
“The industry players, associations and the central bank have to put in efforts to strengthen CBC compliance in motor and to also introduce it for all other personal lines of businesses,” Ankel noted.
CBC refers to making payment before getting covered. For other personal lines of businesses, the general practice is premium warranty – pay within 60 days after coverage.
Lim said insurers would also have to assess and evaluate how price inflation in various sectors of the economy would impact underwriting and claims performance.
“In property insurance, for example, there is a need to encourage policyholders and intermediaries to conduct thorough reviews of sum insured values of their policies as cost of reconstruction, reinstatement and replacement have been severely impacted by higher materials, labour and even transport costs,” he said.
Source from: The Star, December 9 2008, By DALJIT DHESI
URL:
http://biz.thestar.com.my/news/story.asp?file=/2008/12/9/business/2664575&sec=business
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