The takaful business is expanding faster than the conventional insurance business in Malaysia, with the government’s push for affordable insurance and the potential use of better technology as growth potential, according to an international rating agency.
The family and general takaful business in Malaysia expanded by 12.9% and 7.1% respectively, in the first half of 2018 (1H18), faster than the 5.4% and 0.9% in life and general insurance, reported Fitch Ratings Inc.
“We expect the takaful segment to benefit from the government’s push for affordable insurance and achieve 75% insurance penetration by 2020, with takaful contributing 25% — particularly as Muslims dominate the country’s population.
“Greater adoption of technology, particularly in distribution, will be important for operators to capture the untapped population segments and younger consumers with greater cost-effectiveness,” the rating agency said in a report.
On the market share, Fitch said takaful continued to gain share in the domestic insurance market with the family takaful segment accounting for 32% of the overall life market based on new business premiums in 1H18, up from 30% for 2017.
General takaful maintained its share of 13% of the overall general insurance market, while family takaful made up more than 60% of total new businesses in Malaysia.
The number of takaful operators increased to 15 from 11 a year ago, as operators separated their family and general takaful operations in line with licensing rules, the rating agency said in a report.
On the licence split, Fitch noted that composite operators have completed the split of their family and takaful operations as mandated by the Islamic Financial Services Act 2013.
It said four operators have continued both operations under separate legal entities, while two others have ceased their general takaful operations to focus on family takaful.
The rating agency said it believes these corporate actions are positive for the overall industry, as the higher capital requirements encourage a sharper business focus, as management seeks to optimise returns on the increased capital deployed. — TMR