Gen­eral In­surance Agents Con­ven­tion 2012 (GIAC 2012)

The Way For­ward… What is the Big Pic­ture?

Insurance - - EVENT REVIEW -

The fifth Gen­eral In­surance Agents Con­ven­tion 2012 (GIAC

2012) or­gan­ised by The Malaysian In­surance In­sti­tute (MII) brought to­gether the reg­u­la­tor,

in­dus­try ex­perts and in­dus­try play­ers to dis­cuss cur­rent and

fu­ture chal­lenges, is­sues and op­por­tu­ni­ties of the Malaysian in­surance in­dus­try. With ad­di­tional fo­cus on Bank Ne­gara Malaysia (BNM) rec­om­men­da­tions from the Fi­nan­cial Sec­tor Blue­print.

In his of­fi­ci­at­ing ad­dress, Wong Kim Teck, Chair­man of PIAM, ac­knowl­edged that agents are the pri­mary con­nec­tion be­tween an in­surer and prospec­tive cus­tomers. It has al­ways been the ob­jec­tive of in­surance com­pa­nies to en­sure that their agents project a good and pro­fes­sional im­age of their com­pa­nies.

“In this re­gard, the As­so­ci­a­tion has al­ways sup­ported the in­surance com­pa­nies’ needs and had put in place var­i­ous en­hance­ment mea­sures to en­sure agents’ pro­fes­sion­al­ism which in­clude the min­i­mum en­trance qual­i­fi­ca­tion re­quire­ments of new agents, con­tin­u­ous pro­fes­sional devel­op­ment train­ing for ev­ery reg­is­tered agent and also other on-go­ing prod­uct knowl­edge train­ing by in­surance com­pa­nies that are spe­cific to their un­der­writ­ing busi­ness and cour­ses of­fered by MII,” said Wong.

How­ever, the con­stantly chang­ing eco­nomic en­vi­ron­ment, devel­op­ment of dis­cern­ing cus­tomers, the in­tro­duc­tion of new distri­bu­tion

chan­nels within in­surance, glob­al­i­sa­tion, cli­mate changes, un­pre­dictable world po­lit­i­cal and eco­nomic sen­ti­ments and fi­nan­cial con­straints are tough re­al­i­ties that in­sur­ers and their agents have to face and over­come.

Ac­cord­ing to the Swiss Re Asia Risk Sur­vey 2011 shared by BNM, the in­surance agent (80%) re­mains the most pre­ferred chan­nel of distri­bu­tion in emerg­ing economies com­pared to the in­ter­net (55%) which is the pre­ferred chan­nel for distri­bu­tion in devel­oped mar­kets. This statis­tic em­pha­sised the im­por­tance of an agent re­main­ing "rel­e­vant" in the cus­tomer-agent re­la­tion­ship in the fu­ture.

Suhaimi Ali, Di­rec­tor of Con­sumer and Mar­ket Con­duct De­part­ment of Bank Ne­gara Malaysia gave an over­view of the devel­op­ment of the gen­eral in­surance in­dus­try in Malaysia in re­cent years. He high­lighted that there was steady growth in pre­mi­ums and as­sets over the past 10 years for the gen­eral in­surance in­dus­try, where pre­mium in­come of gen­eral busi­ness grew by 9% to RM10.9 bil­lion in 2011 (RM12 bil­lion in­clu­sive of the taka­ful sec­tor). As­sets size of the gen­eral in­surance sec­tor stood at RM26.3 bil­lion in 2011 (RM28.9 bil­lion in­clud­ing taka­ful sec­tor).

BNM’s find­ings have in­di­cated that the agency chan­nel re­mains the most dom­i­nant distri­bu­tion chan­nel for gen­eral in­surance busi­ness, where agents ac­count for 65% (based on gross pre­mium from Jan­uary to De­cem­ber 2011) com­pared to the other chan­nels such as in­surance bro­kers (16%), di­rect clients (10%), banks (8%) and oth­ers (1%).

Re­sults seem to in­di­cate pos­i­tive growth prospects for the in­surance in­dus­try. The pen­e­tra­tion rate in 2011 was 56%. There seems to be tremen­dous op­por­tu­nity for growth in light of the in­creas­ing dis­pos­able in­come of the pop­u­la­tion. The at­tributes to growth in­clude de­mo­graphic changes such as longer life ex­pectancy in Malaysia that con­trib­utes to the in­creas­ing de­mand for med­i­cal in­surance and re­tire­ment plans. Ad­di­tion­ally, there is emer­gence of alternative distri­bu­tion chan­nels giv­ing prod­ucts a wider reach to other seg­ments of the pop­u­la­tion.

Some of the key changes in this pos­i­tive di­rec­tion can be at­trib­uted to the fol­low­ing:

a) Changes in com­pet­i­tive land­scape

Re­moval of bar­ri­ers to com­pe­ti­tion

The lib­er­al­i­sa­tion of the fi­nan­cial sec­tor

The rise in merg­ers and ac­qui­si­tion ac­tiv­i­ties

b) Cli­mate change

In­creased de­mand for pro­tec­tion against loss re­sult­ing from nat­u­ral catas­tro­phes

c) In­creas­ing con­sumer ex­pec­ta­tions

Pri­vate sec­tor ef­fi­ciency with bet­ter ser­vice lev­els

While there are nine fo­cus ar­eas cited un­der the Fi­nan­cial Sec­tor Blue­print, two ar­eas are sig­nif­i­cant to the in­surance in­dus­try, namely em­pow­er­ing fi­nan­cial con­sumers and tal­ent devel­op­ment to sup­port a more dy­namic fi­nan­cial sec­tor.

The no­tion of em­pow­er­ing fi­nan­cial con­sumers through a strength­ened con­sumer pro­tec­tion frame­work and ef­fec­tive fi­nan­cial ed­u­ca­tion is to achieve the key out­comes of fair deal­ings and treat­ment of con­sumers. The rec­om­men­da­tions

un­der the Fi­nan­cial Sec­tor Blue­print to sup­port th­ese out­comes are:

To pro­mote fi­nan­cial com­pe­tence through in­te­gra­tion of fi­nan­cial ed­u­ca­tion into the for­mal school cur­ricu­lum and higher learn­ing in­sti­tu­tions

Adopt a life event project to de­velop and de­liver pro­grammes and en­cour­age greater col­lab­o­ra­tion among stake­hold­ers in de­liv­er­ing fi­nan­cial ed­u­ca­tion

In­tro­duce a co­he­sive reg­u­la­tory regime that ad­dresses reg­u­la­tory gaps

Es­tab­lish a Fi­nan­cial Om­buds­man Ser­vices Scheme to pro­mote ef­fec­tive and fair han­dling of dis­putes with fi­nan­cial ser­vice providers (FSPs)

Strengthen the en­abling in­fra­struc­ture by pro­vid­ing com­pre­hen­sive ac­cess to fi­nan­cial ed­u­ca­tion in­for­ma­tion and as­sess­ment of ef­fec­tive­ness of fi­nan­cial ed­u­ca­tion ini­tia­tives

Pro­mote and re­in­force fair and re­spon­si­ble prac­tices among FSPs through ap­pro­pri­ate reg­u­la­tion and en­hanced trans­parency such as: pro­mote publi­ca­tion of cus­tomer char­ters by FSPs and im­ple­ment pro­cesses for mea­sur­ing per­for­mance against the char­ters and in­ten­sify su­per­vi­sory re­views of prac­tices by FSPs to re­in­force their deal­ings with cus­tomers

The new leg­isla­tive frame­work pro­vides greater fo­cus on busi­ness con­duct and con­sumer pro­tec­tion. The reg­u­la­tory fo­cus on fair treat­ment of the con­sumer is in­cor­po­rated into the prod­uct life cy­cle. It af­fects prod­uct de­sign, mar­ket­ing and ad­vis­ing as­pects, af­ter sales ser­vices and com­plaints han­dling. It goes with­out say­ing that high stan­dards of pro­fes­sional con­duct are a pri­or­ity.

Hence, the role of in­surance agents is evolved along the lines of th­ese as­pects:

i) Build­ing long-term cus­tomer re­la­tion­ship

To demon­strate a high stan­dard of pro­fes­sion­al­ism, in­tegrity and strong ethics to gen­er­ate greater con­fi­dence and trust

Com­mu­ni­cate ac­cu­rate, rel­e­vant and timely in­for­ma­tion to en­able con­sumers to make in­formed de­ci­sions

Un­der­stand the chang­ing needs of con­sumers and pro­vide value-added ser­vices in risk man­age­ment and in­surance ad­vice

To pro­mote fi­nan­cial lit­er­acy to en­hance con­sumer ed­u­ca­tion

ii) Seek new ar­eas for busi­ness growth

Work with in­sur­ers to de­velop new prod­ucts

Iden­tify ways to achieve greater cost ef­fi­ciency and en­hance pro­duc­tiv­ity im­prove­ments

iii) De­vel­op­ing in­surance ex­per­tise

The in­surance busi­ness is a knowl­edge-in­ten­sive busi­ness where hu­man cap­i­tal is an im­por­tant force for the growth of the in­dus­try

Con­tin­u­ously fo­cus on ed­u­ca­tion and train­ing to ef­fec­tively serve the cus­tomers’ needs

There is no doubt that through the Fi­nan­cial Sec­tor Blue­print frame­work, mar­ket con­duct su­per­vi­sion is strength­ened. In this man­ner, BNM aims to fos­ter a healthy and sus­tain­able fi­nan­cial mar­ket where FSPs deal fairly and eth­i­cally to en­sure the best out­comes for con­sumers. i

Par­tic­i­pants of the Con­ven­tion

Mr Wong Kim Teck, Chair­man of PIAM de­liv­er­ing the key­note ad­dress

En Suhaimi Ali, Di­rec­tor of Con­sumer and Mar­ket Con­duct De­part­ment of BNM

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