Malaysian insurance market looks stable, says Etiqa

Etiqa is profiting from Malaysia’s budding insurance sector, as well as giving back to the community


Malaysia’s insurance sector has come to constitute a sizeable share of the nation’s burgeoning financial services sector in recent years. As of October 2013, insurance accounted for approximately six percent of Malaysia’s total financial assets, equivalent to 15 percent of national GDP according to the IMF (see Fig. 1).

Figure 1

Showing no sign of slowing, “the insurance sector is expected to continue its growth,” says Kamaludin Ahmad, Acting CEO of Etiqa Insurance and Takaful, who anticipates the progressive increase in Malaysia’s economy to compound the rate at which insurance will grow.

High-ranking national results
Total assets for Malaysia’s insurance sector in 2012 totalled MYR 195bn, and clocked up an impressive growth rate of 11.4 percent on the previous year, according to BNM Statistics. Moreover, Malaysia currently ranks second in South East Asia, in terms of insurance penetration by premiums as a percentage of GDP, behind only Singapore. “The increase in customer sophistication, greater demand for retirement savings, growing customer awareness and an increasing need for protection against escalating medical costs,” are just some of the facets driving the sector forward, says Ahmad.

Coupled with a growing Bancassurance business, in light of the sector’s on-going liberalisation, Malaysia will most likely continue with its current upwards growth trajectory. Etiqa ranks fourth in Malaysia’s insurance sector in terms of overall gross premium at MYR 5,382m, and second in total new business with MYR 2,188m. Moreover, on the grounds of profitability and total assets, the firm ranks third, with pre-tax profits of MYR 661m and assets totalling MYR 27.5bn as of FYE 31 December 2012.

“We are all about humanising insurance and takaful, which means we put people over policies. Caring about people is vital for our business’ sustainability, and we aim to change the face of the industry in order to make life easier yet tangibly richer for everyone. We offer products and services that creatively answer the respective needs of our customers, and at the same time allow them to understand the simplicity and transparency of our products and services.”

Well asserted local coverage
As part of Etiqa’s ethos to ensure services and products are made easily accessible to all grades of customer, the company features a strong agency force comprising over 22,000 agents and 33 branches throughout Malaysia, boasting a comprehensive Bancassurance and Bancatakaful distribution network with Maybank branches and other third-party banks.

“We create products and services to best fit the respective needs of all our customers. We offer both insurance and takaful products and services ranging from General, Life, Non-Life and others,” says Ahmad. “Not only do we provide personal insurance to our customers, but also corporate insurance which includes products specifically designed for retail services, manufacturing, construction, engineering, communications, energy, transportation and agriculture industries.”

Ahmad believes recent successes in the nation’s insurance sector to be in large part attributable to Malaysia’s macroeconomic growth. Last year the country surpassed consensus forecasts of little over five percent and demonstrated 5.6 percent real GDP growth.

Ahmad believes recent successes in the nation’s insurance sector to be in large part attributable to Malaysia’s macroeconomic growth

This year’s rate is expected to be 4.8 percent, according to MIER statistics, and although the rate is short of last year’s, the Government plans to implement a series of major investment programmes aimed to double GDP per capita, and turn Malaysia into a high-income country by 2020.

“Driven by the New Economic Model, the Economic Transformation Programme (ETP) and the Tenth Malaysia Plan, the insurance sector is expected to flourish,” says Ahmad. “Initiatives such as infrastructure work under the Employee Insurance Scheme (ETP), the Private Pension Scheme, and the Foreign Workers Health Insurance Scheme will all intensify Malaysia’s insurance sector development.”

The Life Insurance Association of Malaysia (LIAM) forecasts that insurance business will expand by 10 percent in 2013, spurred by the low penetration rate of life insurance (43 percent), the government’s Economic Transformation Programme and higher tax incentives for retirement products.

Keeping a wider scope in mind
The local insurance industry will also face further consolidation in the near future, with increased M&A activity and growing investment interest acting as catalysts for an upturn in general insurance coverage.

“The increase in maximum foreign ownership from 49 percent to 70 percent will make local insurance companies more attractive targets for foreign players,” says Ahmad, which plays into the hands of local provider Etiqa. The principal areas in which insurance will likely grow are medical, retirement, and investment-linked products, which will each be subject to significant developments over the next few months and years.

The rising costs of healthcare and the demand for all-round better benefits have inspired insurers to develop more cost-effective ways of offering protection. The improving conditions of life and a rising life expectancy in Malaysia also pose a challenge to the adequacy of retirement savings – and a growing awareness of financial planning is translating into an impetus for strong growth in investment-linked products.

Furthermore, the internet is emerging as an alternative distribution channel for insurance in Malaysia, with the potential to grow quite considerably from now onwards. “To cater for this market segment, Etiqa has been the frontrunner for direct sales through the internet with our e-channels. Customers also have access to the free 24 hour Auto Assist programme, and can check motor claim statuses on-line.”

Furthermore, the internet is emerging as an alternative distribution channel for insurance in Malaysia, with the potential to grow quite considerably from now onwards

Overall, claims Ahmad, “the outlook for the Malaysian insurance market is stable. Forecasts suggest that the industry’s premium income will remain steady, and the local insurance industry will remain well-capitalised.” Far from excluding external factors, Etiqa’s success is also due in large part to the company’s efforts to connect with consumers, implementing a client-centric and responsible corporate culture wherever possible.

“CSR has always been an important part of business all over Malaysia, but we feel more so in the insurance sector,” says Ahmad. “Insurance companies have always been seen as cold and calculative, but over the years, CSR has grown to complement the business of insurance. With the right tools, CSR can play an important role in demonstrating that insurance companies can also be sensitive towards the needs of society.”

Nowhere is this more so the case than with Etiqa, which often goes beyond what is expected, catering to matters of corporate social responsibility. “At Etiqa, we believe in going back to basics whereby insurance is all about helping people during the mishaps, accidents and challenges they face in their lives. In a way, CSR and insurance are one and the same,” says Ahmad.

Targeting CSR initiatives
“Since insurance and takaful is all about investing in one’s financial future, Etiqa’s CSR programme focuses on investing in people and preparing them for the future.

“This means that our corporate responsibility programme is geared towards providing assistance and support to selected community segments, and to have them better prepared in facing life and its challenges, be it financially or personally.” The umbrella message of Etiqa’s CSR programmes is to be prepared, and focusses specifically on educating the public on the importance of insurance so that they’re covered financially in the event of trauma or hardship befalling them.

Since 2006, Etiqa has proactively participated in a number of CSR initiatives geared specifically at women and the youth in Malaysia. “These programmes are important as they provide an avenue for youths and women to gain more knowledge on how they can further enrich their lives. “Through our programmes, they are offered the opportunity to learn how to face real life challenges such as starting and developing careers, juggling work and family, how to plan a career path and so much more.

Since 2006, Etiqa has proactively participated in a number of CSR initiatives geared specifically at women and the youth in Malaysia

“These segments were selected as they represent the youthful, dynamic and proactive nature of the Etiqa brand. The youth and women segments are not only the key target demographic for the Etiqa business but – more importantly – they also represent those most in need of assistance.”

Etiqa’s CSR efforts engage with the community and the firm’s staff. “An example of how we implement our responsibility in the office is the tracking of electricity bills and paper consumption. “By doing so, we are able to educate our staff members on how to be environmentally friendly by reducing electricity and paper wastage. We also expose the staff members to the negative impacts of paper and electricity wastage, which has also affected our operational costs in a positive manner.”

Etiqa is not only a product of recent economic gains in Malaysia, but also an example of how companies can give back to the communities in which they work. “Of course, there is still the business to run, but with CSR, we can give back to society by hosting community programmes that are aligned with our business strategy and direction. As our brand platform is humanising insurance and takaful, our CSR programmes and initiatives are all directed to help enrich and better the lives of those who are in need.