Life insurance, a profitable industry


LIFE insurance is an important means of protection. Malaysia has several insurance companies and takaful operators. This article focuses on life insurance companies in Malaysia.

Data from the Bank Negara Malaysia website shows that the life insurance business in Malaysia is predominantly owned by foreign entities. There are only four locally owned entities, namely Etiqa Life Insurance Berhad, Hong Leong Assurance Berhad, Axxa Affin Life Insurance Berhad and Sunlife Malaysia Assurance Berhad.

Various incentives have been granted by the government, especially in terms of taxation, to ensure rapid growth of life insurance business in Malaysia. Income tax charged for life insurance business has been kept relatively low, as low as 8%, as opposed to other types of business, at around 24%, according to the Income Tax Act 1967. ‘income tax.

In addition, to promote business continuity, income from the sale of policies, i.e. premiums collected by life insurance companies, is also not taxable. Apart from this, the government also provides relief to purchasers of life insurance policies, up to a maximum of RM3,000. This shows the importance of life insurance for the people and the country.

Since 2018, Bank Negara Malaysia has required all insurance companies and takaful operators in Malaysia to distinguish and separate their life and general insurance business. Essentially, this is to allow insurance companies to focus more on the
products sold.

Interestingly, data collected from the audited financial statements of life insurance companies for the period between 2018 and 2020 generated a total gross income of RM29 billion in 2018, of which RM25 billion came from foreign companies and RM4 billion from local companies.

For 2019, the gross income of life insurance companies registered a strong increase of RM44 billion, including RM35 billion of contributions from foreign companies and RM8 billion from local life insurance companies.

While for 2020, there was a slight decline in gross income amounting to RM42 billion, of which RM8 billion was from local companies and the rest from foreign companies. The plausible explanation for the reduction in 2020 may be due to the Covid-19 pandemic which hit Malaysia towards the end of 2019, where it had a huge impact on the country and across the world.

Of the total reported gross income, the largest contribution to life insurance companies came from the sale of policies or premiums. A total of RM29 billion was received for 2018 and 2019, while there was an increase for 2020 of RM31 billion. This shows that Malaysians are increasingly aware of the importance of life insurance. Although overall gross revenue saw a slight decline in 2020, policy sales continued to show an increase.

Comparing the percentage of policy sales of life insurance companies owned by foreigners and local companies, the percentage of sales of foreign companies showed a downward trend from 86% in 2018 to 81% in 2020 , while local companies showed a downward trend. increase in font sales, with 14% for 2018 and 19% for 2020. The possible increase may be due to the type of products offered, promotions and advertising.

Based on the total number of policies sold or risks to be borne, life insurance companies reinsured part of the risks with reinsurance companies. Only 4% of reinsurance policies were underwritten by life insurance companies. This indicates that life insurance companies, whether foreign or local, have a high capacity to pay claims in the event of an insured risk.

The insurance industry in Malaysia is constantly changing and growing. This poses a challenge to all insurance companies, including life insurance companies. Among the challenges they will face is the introduction of Malaysian Financial Reporting Standards (MFRS) 17 to replace MFRS 4, which will come into force in 2023.

All parties, especially insurance companies and law enforcement authorities, principally Bank Negara Malaysia and the Inland Revenue Board (IRB), need to play their respective roles more effectively and efficiently to s Ensure that MFRS 17 complies with existing laws and regulations.

The government, through the IRB, will cooperate with insurance industry stakeholders in understanding and assessing tax laws. As this industry has yet to contribute more to the general economy of this nation through direct taxation, it is hoped that local and foreign companies will work together to offer more innovative advertising methods as well as competitive products that will lead to an increase in sales, which in turn will benefit everyone.

Masnurah Zain, Industry Special Branch, Inland Revenue Board Malaysia. Comments: [email protected]

Note: The data in this article is taken from publicly available information.

Disclaimer: The opinions expressed in this article are those of the author.


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