PETALING JAYA: Prospects for the local insurance industry still look good despite record crude prices and higher global inflationary pressures.Life Insurance Association of Malaysia (Liam) president Ng Lian Lu said: “If high inflation persists, economic growth will be affected, consumer disposable income reduced and a lot of business sectors will be negatively impacted as a result.
“Like it or not, life insurance is not a top priority when it comes to consumer spending. With less disposable income, new life insurance sales would be tougher. Persistency rate of existing in-force policies may also be affected.”
However, he said the picture may not be as gloomy. Historically, life insurance new business growth has been two to three times that of the country’s gross domestic product (GDP).
If as forecast by Bank Negara, Malaysia’s GDP growth remained at between 5% and 6% this year, a double-digit growth in life insurance new business for the year was not beyond reach, he noted.
“Even if high inflation were to be a reality, for those with spare cash, it is more important that they invest their savings well to achieve a positive real rate of return. Life insurance is an ideal instrument for this purpose compared with certain low-risk fixed rate savings products.
“For protection products such as medical insurance and term policies, in a high inflation environment, one should review the coverage as it may become inadequate due to erosion by inflation,” Ng said during an interview.
ACE Synergy Insurance Bhd (ACE Malaysia) CEO Rajbir Nanra said he believed the general insurance industry’s growth prospects would not be heavily impacted, especially in the middle market segment.
“We are confident that our multi-product, multi-distribution strategy will provide us strong insulation against the challenging market conditions. It has given us a balanced business portfolio between our property and casualty, accident and health and commercial lines businesses.
“The strategy has enabled us to serve a myriad of customers ranging from corporate organisations to the man on the street.
“Through this strategy, we had made significant inroads into alternative distribution channels such as agency and bancassurance to market our products,” he said.
It had also enabled ACE Malaysia to diversify its product offerings to suit the different needs of its customers, he added.
Manulife Insurance (M) Bhd president and CEO Peter Robertson said unlike many other industries, the insurance industry would be largely unaffected by inflation as it was driven by customers’ needs.
According to Robertson, financial planning is not dependent on economic cycles. Irrespective of market upturns and downturns, financial planning checks and reviews should be conducted annually, he said. Insurance is one of the key elements of financial planning.
“As such, I do not believe that the current rise in the global price of crude oil and commodities as well as inflation and market volatility will affect the industry’s growth. In fact, in situations such as these, the public should be taking a more active role in reviewing their financial plans,” he said.
He said the current market conditions would not affect the company’s performance this year.
During the first quarter of this year, Manulife’s new business premiums grew by 30% over the previous corresponding period and the company was on track to achieve its target growth for the year, thanks to its distributor productivity programme that had generated positive results
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