Insurers crawl back after grueling COVID-19 battle

By , in Business Nation on .

KUALA LUMPUR, Dec 17 — The year 2020 has been a gruelling one with a rapidly changing industry landscape for insurance companies but they are ready to support business growth and customer centricity.

The second quarter is the most challenging period after the government declared the Movement Control Order (MCO) during which life insurance selling came to a halt as face-to-face selling was restricted for more than three months.

In navigating the crisis, insurers work on redeveloping complete virtual customer products, service offering and distribution channels motivated by the effects of the COVID-19 pandemic including weak consumer demand and the suspension of economic activities.

Life Insurance 

The life insurance sector saw a strong rebound of 44 per cent quarter-on-quarter (q-o-q) growth in new business premiums in the third quarter (Q3) as economic activities started to pick up following the gradual easing of MCO since early-May.

However, the deep impact during the lockdown in Q2 which contracted 37 per cent q-o-q had led to a 6.6 per cent year-on-year (y-o-y) contraction in new business premiums for the nine months to September.


While the strong growth momentum is expected to continue in Q4, the growth for full-year 2020 is likely to be muted, RAM Ratings, financial institution ratings, co-head Sophia Lee told Bernama.

“The pandemic not only affected the industry’s premium growth but also its investment returns amid more volatile financial markets. 

“Insurance players recorded losses from equity investments during the period, but higher gains from investments in bonds provided some support to overall investment performance and profits,” she said.

On aggregate, the life insurance and takaful funds’ bottom line declined by about 40 per cent y-o-y in the first half of 2020. 

However, Lee said the drop is expected to ease as the economic recovery gains momentum.

Despite the lower profitability, the industry remained resilient with the capital adequacy ratio (CAR) in excess of 210 per cent as of end-June 2020, well above the regulatory minimum of 130 per cent, she said.

Based on Bank Negara Malaysia’s (BNM) sensitivity analysis earlier in the year, the industry’s CAR is expected to sustain above the minimum requirement even under a scenario of 200 basis points (bps) decline in interest rates, where cumulative overnight policy rate cuts was 125bps this year.

General Insurance

The general insurance sector’s profitability, on the other hand, was still resilient as the insurers have minimal exposure to equity investments.

The underwriting performance has also improved despite the lower premiums as there were lower motor claims paid during the MCO and conditional MCO periods. 

The latter was due to fewer vehicles on the road and as repair workshops were closed, while the industry’s CAR was robust at 284 per cent as of end-June 2020. 

Relief Measures For Affected Policyholders 

To soften the repercussions of the crisis, insurers have provided life insurance policyholders affected by the pandemic the option of deferring regular premium payments for three months without affecting their coverage. 

According to the Life Insurance Association of Malaysia, more than one million policyholders with total premiums valued at over RM1.6 billion have benefitted from this initiative to date. 

Policyholders could also avail themselves of other forms of assistance offered by insurers based on their protection needs and affordability. 

According to Lee, the impact from the temporary relief measure is expected to be manageable for industry players as the deferment period is relatively short.

BNM has also temporarily waived the credit risk capital charge for exposures related to the relief measure, she said. 

Insurance Providers’ Responses

The events of 2020 have heightened insurers’ commitment to deliver their customer-led strategy by redefining their approach to the business and continuing to prioritise employees, customers and partners.

In addition to revised standard operating procedures, they managed their businesses remotely as employees opted for flexible locations or work-from-home arrangements.

Throughout the MCO period, companies like Zurich Malaysia introduced Zurichers Assistance Programme to support employees with regard to financial assistance.

Those who require financial aid are given access to loans with selected banks with preferred interest rates and enhanced parental leave of up to 112 days.

As physical meetup become inadvisable, the company strengthened digital tools to ease the interactions of employees, agents and intermediaries with customers, Zurich country head Stephen Clark said.

Putting customers at heart, he said the company assisted those impacted by working closely on a case-by-case basis to determine the best solutions for them.

They are encouraged to utilise self-serve portals to check the details of their policies or certificates and make payments.

“We’ll continue to deliver on our customer-led strategies,” he told Bernama, adding that the company will launch a new integrated customer portal to enable customers to check their certificates and policies any time.


Apart from the gradual improvement in new business growth in tandem with the economic recovery, incentives announced under Budget 2021 could also lend support to the industry’s growth in 2021, Lee said. 

The incentives include RM50 ‘Perlindungan Tenang’ (protection) voucher for the B40 community to purchase affordable life insurance as well as allowing Employees Provident Fund members to utilise their Account 2 to purchase life and medical insurance.

“While the toughest time might be over with news of COVID-19 vaccines, normalcy is not likely in the near term and businesses will continue to be challenged,” she said. 

Lee expects the industry will have to contend with persistent weak investment returns as interest rates remain at very low levels due to aggressive efforts from BNM to haul the economy out of the COVID-19 induced recession.

Meanwhile, leveraging the initiative at the global level, Clark said the insights from Zurich Insurance Group and University of Oxford’s ongoing study on ‘Workforce Protection’ will help the group meet the changing needs of the workforce and customers.

“We believe these insights will be beneficial for the entire industry to progress along with the changing consumer market and sentiments,” he said.


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