Malaysia's insurance and takaful sectors are projected to see a modest rise in demand for coverage in the first half of 2024 according to a report by AmInvestment Bank Bhd.
This forecast is influenced by uncertainties around interest rate movements and inflation in developed economies. The report also notes that claims have remained high due to inflation and a weakening ringgit.
The research, reported by The Malaysian Reserve, indicates that gross written premiums and contributions in the insurance and takaful sectors are expected to experience modest growth in 2024. This outlook is shaped by factors such as elevated household debt and the cost-of-living pressures, potentially exacerbated by the extension of subsidy rationalisation to RON95 fuel.
The bank’s economists project inflation in 2024 to range between 2.5% and 3.5%, factoring in the effects of subsidy rationalisation and the increase in the services tax. However, there is potential for higher inflation if subsidy rationalisation extends to RON95 fuel.
For the first nine months of 2023 (9M23), the combined general insurance and takaful gross written premiums and contributions saw a 9.7% year-on-year growth. This growth was primarily driven by sectors such as fire, motor, marine, aviation, transit, contractor’s all-risk engineering, liabilities, medical, and health.
Looking ahead to 2024, the bank expects the gross written premiums and contributions for general insurance and takaful to register a high single to low double-digit growth. However, growth in motor premiums and contributions is anticipated to be lower following the end of the Sales and Services Tax exemption.
For life/family takaful premium and contributions, a mid-single to 10% growth is projected for 2024. The report suggests that macroeconomic headwinds and inflationary pressures may lead to consumer caution in committing to long-term life insurance plans.
In terms of claims, the net claims incurred ratio for combined general insurance and takaful rose to 59.3% in 9M23 from 55.6% in 9M22. This increase is attributed to higher net claims incurred in fire, motor, and medical and health segments. Medical claims are expected to continue trending upwards due to inflation, leading life insurance and takaful companies to adjust premiums and contributions accordingly. For general insurance and takaful, motor claims are likely to remain high, impacted by the weaker domestic currency affecting the cost of parts replacement.
Adverse weather conditions are also expected to affect fire claims, potentially resulting in higher net claims incurred ratios for this segment compared to pre-pandemic levels.
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