By Habhajan Singh
Insurance companies in Malaysia are much stronger than in the past, have more expertise and are run by strong management teams, says Life Insurance Association of Malaysia (LIAM) president Ng Lian Lu.
"I think the local industry is certainly ready to face future challenges," he told The Malaysian Reserve when asked if the players are prepared for the hurdles posed by globalisation.
"In fact, a majority of the present life insurance companies have strategic partnerships with international players," said Ng who is also chief executive officer of AmAssurance Bhd. He said this when commenting on the Financial Sector Masterplan released by Bank Negara Malaysia (BNM) in March 2001.
In the document, which expires next year, it was noted that one of the major challenges facing the insurance industry going forward was the "increasing competition from traditional players as global trends of consolidation and specialisation create international insurers that are larger, better skilled and more focused on core areas of competence".
Asked if this was still an issue, he said: "With the pace of globalisation and increasing presence of global players in the market through various joint ventures in the past few years, competition against international insurers is no longer something new to the local industry." In fact, the local life insurance market has seen the presence of foreign players for many years now.
These include the likes of Singapore-based Great Eastern, UKbased Prudential, Dutch-owned ING Insurance and US-headquartered American International Assurance (AIA). Their life outfits in Malaysia — Great Eastern Life Assurance (Malaysia) Bhd, Prudential Assurance Malaysia Bhd, ING Insurance Bhd and American International Assurance Bhd — have all had a long presence in Malaysia.
Most local insurers have also forged a tie-up with foreign partners. For example, local banking group CIMB Bhd's insurance arm has tied up with Aviva plc, the world's fifth-largest insurance group and the biggest in the UK, to form CIMB Aviva Assurance Bhd.
Incorporated in February 2006, AXA Affin Life Insurance Bhd is a joint venture company between AXA Asia Pacific Holdings Ltd and Affin Holdings Bhd.
AXA Group today is the result of a series of mergers involving French regional mutual insurance companies. Two local players in the life sector without foreign partners are Hong Leong Assurance Bhd and Malaysian Assurance Alliance Bhd. When asked about potential of mergers and acquisitions (M&A) on the life sector side, Ng said association does not rule it out.
"Personally, I would have thought that more M&A activities are likely to happen in the general insurance industry than the life sector," he said.
Other players in Malaysia's life insurance sector are Allianz Life Insurance Malaysia Bhd, Etiqa Insurance Bhd, Hannover Life Re (Malaysian Branch), Malaysian Life Reinsurance Group Bhd, Manulife Insurance Bhd, Mayban Life Assurance Bhd, MCIS Zurich Insurance Bhd, TM Asia Life Malaysia Bhd and Uni.Asia Life Assurance Bhd.
When commenting on the industry outlook, Ng noted that the key challenge in an environment like the present is achieving good investment returns.
"The distribution force will also have to put in extra effort to educate consumers on the importance of having adequate insurance coverage, especially during this difficult time. "Insurance companies will also need to be more innovative taking into account customers needs which may be different in such an environment," he said.
On the industry outlook for 2009, he said the industry foresees that the single premium business to remain stagnant in 2009. "However, the annual premium business should still be able to achieve a single-digit growth. The prospect of group insurance business remains good following a strong performance in 2008," he said.
PHOTOGRAPH: 'Insurance companies will need to be more innovative,' says Ng (2nd left) with fellow members of the management committee (from left) Great Eastern CEO Koh Yaw Hui, AXA Affin Life Insurance CEO Vincent Kwo, ING Insurance MD Datuk Dr Nirmala Menon, UniAsia Life Assurance CEO Ooi Say Teng and MCIS Zurich Insurance CEO Md Adnan Md Zain
(This story appeared in The Malaysian Reserve on Mar 6, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, edited by Habhajan Singh.)
