Life insurers urged to focus on fundamentals to ride out storm

By Alfean Hardy
The Life Insurance Association of Malaysia (LIAM) is calling upon the life insurance sector to remain focussed on the industry's key fundamentals in order to ride out the global financial crisis and its president, Md Adnan Md Zain, is predicting single digit growth for the sector in spite of the current economic climate.
In a speech at the 17th Strategic Issues Conference in Kuala Lumpur yesterday, Md Adnan said 2008 had been a challenging year for the indusry, given a global financial turmoil that has been considered the worst since the Great Depression of the 1930s.
"Nevertheless, there are always sliver linings that will appear with untapped business opportunities, multiplied with unexpected growth possibilities. By focussing on key fundamentals, including sound risk management, highly prudential and regulatory standards, and strong corporate governance, we are confident that we'll be able to ride out this stormy crisis," he added.
Speaking to reporters later, Md Adnan said that the country had benefited from steps undertaken by the authorities, like the adoption of the risk-based capital framework in January 2009, which aimed to create a strong risk management structure.
"Players are now more mindful that of ensuring that they put in place good processes and proper management practices to be able to bring out strengths in various areas for the betterment of themselves and their policyholders and, that in itself, will make the players perform at far higher standards," he added.
Md Adnan, who is also the chief executive officer of MCIS Zurich, said the life insurance sector has also been helped by a public at large that has come to a great understanding on the importance of life insurance in their lifes, barring investment-linked products.
"Even as we speak, the economic situation is the one that is not encouraging. Yet, there's still growth in the life insurance industry. Perhaps, because of the investment climate, investmentlinked products may not be featuring very well in terms of growth but the traditional life insurance is still showing good developments. People are still buying insurance. That clearly shows the knowledge, the awareness and people are recognising the importance of life insurance, both in terms of protection as well as savings. Medical is also another area that is shifting up well. And, for a country like ours, these are areas that will really see more growth opportunities with the growing population and the understanding of needs of people protecting themselves. Medical costs are also increasing and people have become more conscious of the good of insurance to provide them with a good position to provide for themselves and their families through insurance coverage," he added.
Md Adnan said, to question about growth forecast for the sector this year was his personal view that the life insurance sector would see single digit growth this year.
"We have been having some double digit growth in the past. You will see growth but it will be single digit growth," he said. "For traditional life insurance, growth is fairing much better. but investment linked is slowing down. It's cyclical and with the measures being undertaken by the authorities, in ensuring the stability of the economy, it's a matter of time that you will find the positive changes taking place and that will again bring back the confidence in the investmentlinked segment," he added.

(This story appeared in The Malaysian Reserve on June 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)