Malaysia’s takaful growth has continued to outpace the conventional insurance sector in 2017, said Fitch Ratings. Family and general takaful grew by 7.5% and 5.9%, respectively, in the first half of 2017, compared with 5.2% and -1.8% in life and general insurance, respectively.
Family takaful accounted for 30.5% of the overall life market based on new business premiums in 1H2017, up from 28.8% at end-2016.
General takaful accounts were 12.8% of the overall general insurance market in the same period, up from 12.2%.
Within the takaful segment, family takaful represents more than 60% of total new business in Malaysia, according to Fitch.
In terms of growth catalysts, the ratings agency said it expects the takaful segment to benefit from the government’s push for affordable insurance and achieving 75% insurance penetration by 2020, particularly given the Muslim-dominated ethnic make-up of the untapped population segments.
The liberalisation of motor tariffs that began in July 2017 bodes well for improved risk-pricing and may provide a boost to motor takaful premiums in the short term as policyholders are likely to reassess their options across both conventional and takaful platforms.
Fitch said the rule that requires takaful operators to split their composite licence into family and general insurance separately by July 2018 may lead to smaller-scale players to consider M&A options to divest their portfolios if they are unable to justify the additional regulatory capital burden and start-up costs on the onset.
Another key development is the removal of commission limits for critical illness and medical/health products, and the establishment of direct channels offering these products on a commission-free basis. Bancassurance commission limits will be aligned with corporate agents starting 2018 and the balanced scorecard will be fully implemented. The agency believes that these measures, part of the Life Insurance and Family Takaful Framework (LIFE), will promote product innovation, healthy competition and all-rounded growth in the long term. M