By Chee Jo-Ey
WE purchase insurance so we can have a financial safety net when unexpected circumstances arise.
But a comprehensive policy can cost you quite a sum every month. So, it is imperative to be wise about this and make sure your hard-earned money goes only to the policies you need.
When we think of unpredictable events that can really put a dent on our savings, wouldn’t our health and medical expenses come to mind first?
But according to the Life Insurance Association of Malaysia (LIAM), the life insurance industry had recorded a total of 969,680 new policies in the third quarter of 2019, an increase of 7.6%.
Meanwhile, medical and health insurance (MHI) declined 11.4% to RM 1.02 bil. Malaysia is known to have one of the highest medical inflation rates in the Asean region.
According to the Persatuan Insurans Am Malaysia (PIAM), general insurance industry registered a decline of 0.8% in 2019 with total gross direct premiums of RM 17.41 bil. Motor remained the largest class with a market share of 48.3% followed by fire at 19.3%.
A survey report last year by the Willis Towers Watson found that in 2019, Malaysia was ranked among the highest in the region with 13.1% expected increase in medical costs.
If healthcare costs are not contained, increase in premiums for medical and health insurance will be inevitable. If medical insurance is no longer affordable, it will drive more patients to seek treatment at government hospitals.
According to MIDF Research, the ongoing phased liberalisation of the motor and fire insurance will keep the general segments under pressure. This is primarily attributable to undercutting of products’ pricing in order to gain market share.
On a positive note however, the research house opines that life and family takaful segments are expected to remain resilient. The profitability of the overall insurance and takaful sector have been improving as driven largely by the higher growth of net premiums and contributions in the life insurance and family takaful segments.
While the Minimum Allocation Rate (MAR) which came into effect on July 1 2019 for life insurance is expected to affect new business growth and profitability of investment-linked products (ILP), the growth will be partly sustained by the insurance tax relief of RM3,000 and the increasing popularity of ILP.
To recall, the ILP accounted for 59% and 36% of the new business growth for Life Insurance and Family Takaful segments respectively in CY19. Moving forward, the research house opines that the growth in the insurance sector will largely coming from the life segments as compared non-life which is going through a transition period towards a liberalised market.
Although many purchase life insurance for the investment-linked aspect of it, some might think it is unwise to do so and that we should have our insurance and investment separate.
Some ILPs tend to focus mainly on investment and neglected the insurance part of the equation, providing minimal insurance coverage, with death benefit as the only coverage.
It is important to note that if your ILP sub-funds have failed to perform well enough to cover the cost of insurance, there is a possibility you may need to top up your premium or sacrifice your insurance coverage portion of your ILP or the policy will lapse. - April 14, 2020