Takaful Malaysia upbeat on growth

WITH Malaysia’s spiralling medical inflation, finding a middle ground has become crucial, Syarikat Takaful Malaysia Keluarga Bhd (Takaful Malaysia) group chief executive officer (GCEO) Nor Azman Zainal says.

He tells StarBiz 7 that complexities in Malaysia’s healthcare system will continue to rise.

“Malaysia is heading towards being an ageing society, and many people will not be able to afford healthcare. We have to put aside our interests to help the nation,” he says.

Nor Azman envisions this middle ground to be one where all stakeholders, including hospitals, insurers, takaful operators, regulators and other industry players as well as consumers, collaborate to find a solution to ensure healthcare remains accessible and affordable.

In 2024, medical health insurance and takaful premiums surged by 30% to 50%.

In the same year, Malaysia’s medical inflation stood at 11.9%, higher than the global and Asia-Pacific average. The country’s medical inflation is expected to hit 13% in 2025.

Insurers and takaful operators are also feeling the heat. Premium and contribution hikes not only impact the affordability of consumers, but also “reshape the risk landscape for insurance and takaful companies in Malaysia”.

“This has prompted all players to reassess pricing strategies, underwriting policies and certificates, including long-term sustainability,” points out Nor Azman.

He adds that imported drugs and high hospital utilisation rates are significant contributors to medical inflation.

“Providing consumers the option to buy generic alternatives from pharmacies could help manage costs,” he says.

Higher hospital utilisation, with frequent visits and prolonged hospital stays, also drive up overall healthcare expenses.

Citing other countries, he says structured referral systems help manage this demand, ensuring patients go through proper channels before seeking specialist treatment. “We are getting there, but until then, costs will continue to rise,” he notes.

Despite these challenges, Takaful Malaysia remains relatively vigilant, he says. “Our exposure to individual health plans is very minimal.”

Since Takaful Malaysia began operations in the 1980s, its mainstay has been selling family and general takaful products. Its move into standalone online individual medical protection plans only began recently, its GCEO explains.

“We only started selling our online personal medical plans less than two years ago. So, our exposure is minimal compared to others,” he says.

Good business

For its financial year ended Dec 31, 2024 (FY24), revenue and profits were up by 22% and 9%, respectively, due to higher contributions from both its family and general takaful business, and higher takaful coverage.

Going by Bloomberg data, all eight analysts covering the stock have a “buy” call on it, with the 12-month consensus target price being RM5, a 30.4% upside from its current price of RM3.55 as of the time of writing.

Analysts favour Takaful Malaysia due to its bright prospects, with Hong Leong Investment Bank (HLIB) Research citing the underpenetrated insurance space and favourable demographics as causes.

The stock also has a 5.2% dividend yield, and RHB Research notes that the company’s dividend reinvestment plan indicates the potential for higher payouts in the future.

“We think the larger payout is sustainable, as Takaful Malaysia recently established a dividend reinvestment plan, which would allow for greater conservation of capital, especially with evolving capital regulations,” it mentions.

Another plus point is that Takaful Malaysia does not have an individual agency business, thus lowering its business acquisition costs.

By going directly to the market, Takaful Malaysia achieves cost savings that can be passed on to customers. “This is why we have managed to offer competitive products which are affordable, attractive and simple,” Nor Azman explains.

He also views Takaful Malaysia as an “outlier” within the industry, noting that the group’s business model creates wider opportunities.

“When it comes to family takaful, we are the only ones who do not have an individual agency business. We either go directly to the market or through our bank partners.

“Our competitors rely on agencies, but does that mean we are behind? No. We see this as an opportunity,” he adds.

With a market share currently hovering around 20% within the family takaful space, he believes there is significant room for expansion.

Direct-to-market strategies

One of Takaful Malaysia’s “direct-to-customer” strategies is its ambitious online strategy, through its newly-launched “Kaotim” digital platform.

Nor Azman says this platform is about creating direct access to the retail market and ensuring that the company has a robust digital strategy.

He is happy with Kaotim’s progress and competitors are sitting up and taking notice of the platform.

“We are telling the market that you have a direct way to choose your protection plans,” he notes, adding that the firm has added more products quickly to cater to the market’s needs.

Kaotim now offers medical cards, car and motorcycle coverage, and even legacy products (also known as life insurance products), with plans to expand further by ramping up Kaotim with potential new products.

Kenanga Research views Kaotim as a way to reach underserved communities and young adults, complementing Takaful Malaysia’s strong “bancatakaful” partnerships tied to industry financing growth.

Bancatakaful, the distribution of takaful products through banks, remains a key direct-to-market strategy, which Nor Azman considers crucial in maintaining market leadership.

“As long as banks grow their business, bancatakaful will grow as well. Maintaining our position as a market leader in this space is essential.”

Beyond bancatakaful, the company is expanding its presence in general and retail family takaful, particularly in the underpenetrated retail segment.

“We’ve been playing in the banca and credit-related business, but we want a bigger market share in the retail family segment. All the work for 2025 onwards is about strengthening our presence here,” he adds.

General takaful remains a promising avenue. With only four players in Malaysia, the sector presents abundant opportunities that have yet to be fully explored.

With these strategies in motion, Nor Azman remains confident about the company’s growth.

“That’s how I see 2025 – solidifying our position in bancatakaful, strengthening our retail family presence and further penetrating general takaful. All in all, I’m optimistic that the market will grow,” he adds.