PETALING JAYA: Insurers are cautiously optimistic the second half of 2010 will be better than the first amid the stable economic environment despite volatility in the global markets.
Manulife Holdings Bhd group chief executive officer Michael Chan said the company was cautiously optimistic of a better second half due to improved market sentiment and higher consumer confidence.
“For consumers who follow market trends, the improved environment means that they will start looking again at insurance needs and long-term savings. Insurance will continue to be a key component in financial planning regardless of the economic environment and this means it will continue to generate new sales in the second half of the year,” he told StarBiz.
Apart from continued stability in the economic environment, Chan added that another growth driver would be new product launches that met consumers’ needs and were relevant to the current times.
While basic insurance planning remained largely unchanged, he said the features and benefits of insurance plans must be aligned with the constantly changing consumer demands.
For the industry to grow, he said it needed better trained and professional insurance advisers and continually develop distributors to be knowledgeable, well-informed and focused on providing quality service to customers.
General insurer ACE Synergy Insurance Bhd (ACE Malaysia) CEO and managing director Raj Nanra said that despite the record-breaking economic growth of 10.1% in the first half of the year, the outlook for the industry would not change drastically as consumers were taking the “wait and see” approach and remained cautious in their spending.
Personal lines and retail insurance for individuals would still present a challenge in the next half of the year, Nanra noted.
The Government’s support for the private sector and small and medium enterprises (SMEs) under the 10th Malaysia Plan and the liberalisation of the financial sector would help spur the growth of the industry.
“SMEs make up 99% of Malaysia’s total registered business and the development of this sector will support the growth of the insurance industry, especially in commercial risk insurance.
“Coupled with the demand for insurance needs from major corporations, which view insurance as a key risk management tool, the market will very likely see a rise in interest from the commercial, property, casualty and liability sectors,” Nanra added.
According to Chan, Bank Negara’s move to increase interest rates can impede insurance sales in the second half due to perceived low returns from insurance products compared with bank rates, apart from possible recurrence of global financial instability.
Investment-linked products and plans that guarantee a minimum return higher than bank fixed deposit rates and capital-guaranteed types of plans were expected to spur the growth of insurance products, he said.
Some of the challenges that would hinder the industry’s growth would be the global economic scenario as well as the shortage of skilled staff in areas such as actuarial, agency management and product development.
According to Nanra, the industry continues to experience soft market conditions as competition intensifies in the marketplace.
“Consumers’ ‘wait and see’ approach will be a challenge to the industry and market liberalisation will result in fewer but bigger players in the market and more professionalism,” he noted.
On the trends moving forward, Chan said: “We foresee that there will be a bigger emphasis on the bumiputra market not only in the takaful but also in conventional insurance segment.
“With market sentiment improving, there could be a shift to more investment-linked sales as customers may prefer to enjoy the potential upside of market performance for such products.”
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