General Insurance Industry
Premium growth hinges on economic recovery
MARC expects insurers’ revenue to experience higher growth going into the second half of 2010 and 2011 in line with the recovery of the Malaysian economy and the improvements in trade and business sentiments. Lower motor vehicles sales, which was approximately 2% lower in 2009 than in 2008, affected premiums underwritten during the year. However, the Malaysian Automotive Association has estimated a 2.4% increase in total industry volume for 2010, which is likely to provide some growth impetus to the lagging motor insurance segment, albeit softened to an extent by the rise in lending rates following the recent increases in the overnight policy rate. Furthermore, the growth prospects of the segments is likely to be moderated by the larger market share of lower-value Perodua and Proton cars, which currently command more than 55% of the automotive market and in MARC’s view is likely to increase due to consumer cost preferences and the possible reduction of fuel subsidies. Premium growth aside, the actual underwriting results of the motor segment is likely to remain weak due to higher claim experience and the regulated low tariff structure. Any positive revision to the motor tariff-rated premium structure or revamp to the motor insurance regime is expected to contribute positively to the insurers’ bottom lines.
The medical and personal accident insurance segment, which has a relatively lower correlation with the performance of the economy, is
expected insurance consumer escalating
to register notable growth, despite stiff competition from the life
The expansion is mainly spurred
awareness and need for protection medical and healthcare expenses.
by increasing concerns over
While investment income is expected to remain constrained under the current interest rate environment, MARC believes that premium growth will pick up into the second half of 2010 considering the recent signs of economic recovery. This will set the stage for improved underwriting performance for the general insurance sector as a whole.