General Insurance Agents Convention 2012 (GIAC 2012)
The Way Forward… What is the Big Picture?
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