‘Takaful outran conventional insurance in 2017’

Growth of Malaysia’s takaful continued to rise faster than the conventional insurance sector in 2017, led by burgeoning domestic consumption and a government push for greater penetration, according to Fitch Ratings.

Family and general takaful grew by 7.5 percent and 5.9 percent, respectively, in the first half of 2017, compared with 5.2 percent and -1.8 percent in life and general insurance respectively.

Family takaful accounted for 30.5 percent of the total life market, while general takaful made up 12.8 percent during the same period, suggesting that there is room for growth.

The central bank is pushing for the industry to offer affordable premiums to raise the overall life insurance coverage from 56 percent in 2016 to 75 percent by 2020, reaching out to the untapped market of the Muslim-majority population, stated a report by Nikkei Asian Review. This entails making changes to regulatory frameworks to encourage innovations in product offerings and competition.

The rating agency said an upcoming rule that requires takaful operators to split their composite license into family and general insurance separately by July may lead to mergers-and-acquisitions activities within the sector. There are eight composite license holders out of a total of 11 takaful operators in the country, and smaller players may want to divest to avoid incurring additional capital and start-up costs as a result of the split, Fitch said.

Another key development is the gradual removal of commission limits for health insurance products starting in January and the establishment of direct channels offering these products on a commission-free basis.