KUALA LUMPUR: The Life Insurance Association of Malaysia (LIAM) expects the new life insurance business to grow some 10 per cent, outpacing the country's projected economic growth rate of about five per cent this year.
The umbrella body for Malaysian life insurers said more companies will roll out annuity products to take advantage of the RM3,000 tax relief made available by the government.
At the same time, medical insurance will continue to enjoy high growth rate as the country moves towards a high-income nation status.
LIAM expects the trend of moving to alternative distribution channels such as banks and direct marketing will continue.
However, agency distribution channel will continue to be the dominant distribution channel for the next few years.
In 2012, the life insurance industry registered a new business growth of 2.2 per cent, with RM4.3 billion weighted premium as compared with RM4.2 billion in 2011.
Investment-linked policies continued to outshine traditional policies in terms of growth with 49.5 per cent of new business share.
In 2011, the investment-linked policies formed a lower portionof 45.6 per cent of all new policies sold.
"With the implementation of the risk-based capital framework and continued low interest rate environment, traditional products are becoming less attractive as they are more capital-intensive," said LIAM president Vincent Kwo.
"Consumers are also increasingly favouring investment-linked policies given its flexibility and possible returns, on top of having protection and savings."
Recent structural reforms have transitioned the industry towards more market-based pricing mechanisms in key market segments and it has also improved efficiencies in the insurance eco-system.
The reforms have also resulted in providing a strengthened framework for consumer protection, Kwo added.
Under the Economic Transformation Programme of Malaysia, the government has set a target of 75 per cent of the population to be insured by 2020 and has mapped out various initiatives to enhance the role of insurance in economic development.
Based on LIAM's figures, the local population was covered with RM1.02 trillion sum insured in various forms of life insurance policies as at December 2012.