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KUALA LUMPUR, RAM Ratings Services Bhd sees slower growth in both life and family takaful and non-life segments in 2024, due to inflationary pressures but the overall sector is well-capitalised to absorb some margin compression and potential shocks.
RAM co-head of Financial Institution Ratings Sophia Lee said new business in life is expected to expand between 3.5 per cent and 4.0 per cent year-on-year versus 4.2 per cent as consumers raised concerns about rising costs and surging medical claims.
‘Surging medical claims have crimped earnings of life insurers and family takaful operators, triggering repricing exercises that could impact affordability.
‘To encourage more responsible healthcare usage, BNM now requires all insurers and takaful operators to include cost-sharing provisions in new individual medical and health products,’ she said in a statement.
On general insurance and takaful premiums, the segment is to grow by a slower five per cent this year versus 9.4 per cent last year as car sales are exp
ected to ease.
‘Margins are at their thinnest in a decade and will remain compressed amid intense competition,’ she added.
Lee also pointed out that financial market volatility would continue to be a key factor influencing returns of insurance and takaful operators, particularly those in the life/family takaful segment given substantial investment assets held.
‘Better investment returns lifted sector earnings in 2023 following outsized losses seen the previous year. We expect family takaful to continue to make up between 40 per cent and 50 per cent of new business premiums especially as the Islamic banking sector continues to outpace its conventional counterpart in line with the Islamic-first strategy adopted by various banks.
Notwithstanding weaker new business generation in 2023, family takaful accounted for 42 per cent of total new business premiums/contributions, exceeding the approximate 30 per cent registered a decade ago.
Source: BERNAMA News Agency
