Malaysia’s takaful insurance has significant opportunities for growth as its penetration rate is still low at 5.2% of gross domestic product (GDP).
Malaysian Takaful Association chairman Ahmad Rizlan Azman (picture) noted the low penetration rate of takaful in the country is due to the lack of awareness on takaful-related products as well as the issue of affordability, especially among the lower segments of the society.
“With Malaysia’s low insurance penetration rate of 5.2% of GDP in 2014 and its young demographics, significant market growth opportunities are yet to be tapped by the insurance and takaful sector.
“We also need to figure out innovative ways in penetrating the underserved market for takaful-related products. A growth rate of 12%-13% for the takaful market this year is possible, despite a slowing economy,” he said at the launch of the Malaysian Takaful Dynamics report on the sidelines of the 11th World Islamic Economic Forum yesterday.
The Malaysian Takaful Dynamics report was jointly developed by Malaysian Takaful Association and Ernst & Young (EY) Malaysia. It is the country’s first central compendium on Islamic insurance.
According to the report, Malaysia’s takaful segment has seen a 12.4% compounded annual growth rate (CAGR) over the last five years, compared to the conventional insurance CAGR of 7.8% over the same period.
Takaful products saw a net contribution of RM6.3 billion or 13% of market share, while the conventional insurance segment posted RM42.5 billion.
EY Malaysia partner Brandon Bruce Sta Maria said over the medium to long term, the growth potential for the takaful industry will depend on its ability to tap into the underserved market and enhance consumer awareness on takaful.