Malaysia’s Insurance And Takaful Sector Sees Profit Dip Amid Weaker Investments, Rising Medical Claims

Samuel Chua

24th March 2025 - 3 min read

The overall profitability of Malaysia’s insurance and takaful sector declined in the second half of 2024, as weaker investment performance and higher medical claims weighed heavily on returns. Life insurance and family takaful funds, in particular, saw their excess income over outgo (EIOO) fall to RM4.1 billion from RM4.8 billion in the first half of the year. This reduction was primarily attributed to lower net unrealised gains from investment portfolios, driven by a paring back in equity performance and rising bond yields. Despite this dip in the latter half of the year, the full-year EIOO still improved to RM12.4 billion from RM9.4 billion in 2023, bolstered by the equity market’s stronger showing earlier in the year.

In tandem, net underwriting income for life and family insurance and takaful operators (ITOs) came under pressure due to elevated medical payouts, which reached RM6.2 billion in the second half of 2024, compared to RM5.3 billion in the same period the year before. This was largely a result of higher utilisation rates and overall treatment costs, particularly in cases requiring chronic care. These trends led to increased premiums for medical and health insurance and takaful (MHIT) policies, as the industry took steps to preserve the long-term sustainability of these products. Interim support measures were introduced to cushion policyholders from the impact of the premium revisions, which are set to unfold over a three-year period between 2024 and 2026.

New business premiums for life and family ITOs grew by 6.4% in the second half of the year, slightly down from 6.8% in the same period of 2023. This expansion was driven primarily by investment-linked products, which continued to attract demand due to their flexibility and broader coverage. In contrast, participating life insurance policies continued their decline as consumers favoured products offering protection against more uncertain and varied health risks.

In the general insurance and takaful segment, operating profits rose to RM1.9 billion in the second half of 2024, supported by a stronger underwriting performance. Improved profitability was notably driven by demand in the motor insurance sector, alongside fewer claims from fire-related events. However, in Bank Negara Malaysia’s (BNM) 2024 economic and monetary review, it cautioned that seasonal flood events at the close of 2024 and early 2025 could dampen underwriting results, although the impact is expected to be less severe than that seen in 2021.

Motor insurance underwriting benefited from tariff liberalisation measures under Phase 2A, which enabled more nuanced and risk-based pricing. The net claims incurred ratio for the motor segment stabilised at 69%, aligning with pre-pandemic averages and indicating a recovery in claims normalisation.

The sector remained resilient overall, with strong capital buffers and liquidity positions. The aggregate capital adequacy ratio stood at 224% as at end-2024, well above the regulatory minimum of 130%. Capital buffers in excess of regulatory requirements were also robust, amounting to RM41.1 billion.

Despite this stability, BNM highlighted ongoing vulnerabilities related to the sizeable investment exposures of ITOs. These include sensitivities to financial market fluctuations and climate-related risks, which could translate into financial stress. Structural reforms addressing medical cost drivers were underscored as essential to ensure the sustainability of MHIT products and the broader resilience of the sector.

(Source: BNM)

Samuel Chua

Samuel writes about personal finance and financial news, focusing on how banking updates, policies, and promotions affect everyday money decisions. He enjoys making complicated financial topics easier to follow. Outside of writing, he spends his time watching TV shows and occasionally convincing himself he will only watch one episode.

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