Malaysia’s life insurance has posted impressive 2004 numbers and registered its second year of double-digit growth. With a more favourable investment climate that 2003, further improvements in asset-liability matching and the continual emergence of bancassurance led sales, the combined premium income for the life and general business topped last year’s growth percentage of 11.6% to register 17.2% growth for the year.
In total, the industry’s combined premium income landed at a little over RM22 billion ($5.8 billion), rising substantially over 2003 number of RM18.8 billion ($4.95 billion), while contributing 5.2% to nominal gross national product. Insurance penetration in the country also went from strength-to-strength in 2004, climbing 1.1% on 2003 percentages to 37.9% and maintaining a higher rate than other regional markets like Thailand (3.45%) and transcending even the global average (8.1%).
According the Insurance Annual Report 2004 published by Bank Negara Malaysia, the country’s central bank, the high penetration rate underscores the growing importance of insurance within the economy in terms of promoting economic activity and individual finance, which it believes was conspicuously demonstrated by the continual improvement in operating results for the year.
Total assets of insurance funds expanded by 13.1% in 2004 to RM86.8 billion (around $22.9 billion), largely on the back of the growth of the life insurance business.
In 2004, the Malaysian life insurance market achieved extremely robust movement with new business premiums increasing 36.3% on 2003. On the other hand, a slower increase in excess of income over outgo in 2004 resulted in total life insurance fund assets increasing at a slower rate 16% to RM69.8 billion (close to $18.4 billion).
In terms of total premium leaders in Malaysia, Great Eastern continued its position as the number one player in the domestic life insurance market with RM16.46 billion ($4.3billion). AIA had the second largest premium pool with RM6.4 billion (close to $1.7 billion), while ING was third in total premium.
Similar to regional markets like Hong Kong and South Korea, the influx of new business was largely the result of investment-linked and endowment policies that have become a staple of the global bancassurance market. Within the investment-linked space, which includes both single premiums and anuual premium products, Mayban Life and Prudential emerged as the market leaders.
First emerging in 1993, bancassurance in Malaysia’s insurance industry truly evolved into the primary distribution channel for life insurance in 2004, capturing around 48% of new life premiums and posting a record RM6.6billion ($1.7 billion) in total new business premiums
The majority of bancassurance sales came from single premium endowments (37%) and investment-linked products (30%), while other non-credit related products including education, whole life and medical policies captured around 8% of the market. On the credit product side, consumer credit insurance products purchased by borrowers in connection with mortgages, vehicle loans and overdraft facilities provided by banks constituted a combined 25% of all bancassurance sales.
On the general business side, the Malaysian market sourced around 7% of total premiums from bancassurance, which is largely consistent with other insurance markets. In terms of growth in gross direct premiums, the Malaysia’s general insurance market increased by 4.2% to RM8.53 billion ($2.25 billion), while total assets progressed by a moderate 2.5% to finish the year at RM17 billion ($4.48 billion).