Ap­pre­ci­at­ing the Past Four Decades

LIAM’s Vin­cent Kwo

Insurance - - FEATURE -

QHow do you see the devel­op­ment of the life in­sur­ance in­dus­try in the next 10 years? One of the ob­jec­tives set by the Malaysian Gov­ern­ment is to achieve an in­sured pop­u­la­tion of 75% by year 2020. In Malaysia, we have a dual pro­tec­tion sys­tems which com­ple­ment each other, namely con­ven­tional in­sur­ance and taka­ful (based on syariah prin­ci­ples). Cur­rently the pen­e­tra­tion rate of con­ven­tional in­sur­ance and taka­ful is at 54%. The Gov­ern­ment has re­cently re­leased a con­cept pa­per on Life In­sur­ance and Fam­ily Taka­ful Frame­work (LIFE frame­work) which will serve as a blue­print for the devel­op­ment of the life in­sur­ance and taka­ful in­dus­try It con­tains sev­eral pro­pos­als to re­form the life and taka­ful in­dus­try, aimed at in­creas­ing the pen­e­tra­tion rate and rais­ing the level of op­er­a­tional ef­fi­ciency of the in­dus­try. It is also in­tended to en­hance the level of con­sumer pro­tec­tion as well as drive greater pro­duc­tiv­ity in this sec­tor. A quick glance of the pro­pos­als and key per­for­mance in­di­ca­tors of the LIFE con­cept pa­per is in­di­cated be­low:

In­crease Pen­e­tra­tion Rate from 54% to 75% by 2020, while pro­tect­ing con­sumer in­ter­est

Widen out­reach and di­ver­si­fi­ca­tion of prod­ucts and dis­tri­bu­tion chan­nels

Lib­er­al­ize in­dus­try to pro­mote healthy com­pe­ti­tion and in­no­va­tion of prod­ucts for the ben­e­fit of con­sumers

Strength­en­ing mar­ket con­duct and in­still­ing greater pro­fes­sion­al­ism among in­ter­me­di­aries to en­hance con­sumer pro­tec­tion

More pro­fes­sional ser­vices to en­sure qual­ity ser­vice to con­sumers

Con­tin­u­ous ed­u­ca­tion and con­sumer aware­ness to­wards em­pow­er­ing con­sumers

Preser­va­tion of pol­icy value to en­sure con­sumers ob­tain value from their poli­cies

“One area that in­sur­ers should look at is the fi­nan­cial in­clu­sion for the pop­u­la­tion. This is par­tic­u­larly im­por­tant in the case of Malaysia whereby we have an ur­ban, sub-ur­ban and ru­ral pop­u­la­tion.

Clear and trans­par­ent prod­uct dis­clo­sure to en­sure con­sumers un­der­stand the prod­ucts and ser­vices pur­chased with no hid­den costs

Avail­abil­ity of pure pro­tec­tion prod­ucts via di­rect chan­nels

QHow can the in­dus­try con­trib­ute to ful­fil the Gov­ern­ment’s as­pi­ra­tion in in­sur­ing 75% of Malaysians by 2020? One area that in­sur­ers should look at is the fi­nan­cial in­clu­sion for the pop­u­la­tion. This is par­tic­u­larly im­por­tant in the case of Malaysia whereby we have an ur­ban, sub-ur­ban and ru­ral pop­u­la­tion. There is a need to de­velop suit­able in­sur­ance prod­ucts and in­tro­duce new de­liv­ery chan­nels to reach out to the re­main­der 50%, of which a high per­cent­age of the pop­u­la­tion could be con­cen­trated in ru­ral ar­eas. In 2013, LIAM un­der­took the first pro­tec­tion gap study to­gether with the Univer­siti Ke­bangsaan Malaysia. There is a huge pro­tec­tion gap even for fam­i­lies with in­sur­ance pro­tec­tion. This is be­cause the level of in­sur­ance cov­er­age is still in­ad­e­quate. The key find­ings of the sur­vey in­clude: (a) Many Malaysian house­holds are sub­stan­tially un­der­in­sured. The av­er­age pro­tec­tion gap for fam­i­lies (2 adults and 3 chil­dren) whose pri­mary wage earner has both life and med­i­cal in­sur­ance was RM553,000 per fam­ily. What it means is that, when there is a death to the wage earner of the fam­ily, in or­der for the fam­ily to sus­tain its cur­rent life­style and con­tinue with their daily con­sump­tion, they would need a sum of around RM553,000 to last them for at least 5 years. (b) Fam­i­lies whose pri­mary wage earner was cov­ered by a life pol­icy only and not a med­i­cal pol­icy had a slightly higher gap, at RM642,000 per fam­ily. (c) The av­er­age pro­tec­tion gap for the group headed by a bread­win­ner who was not cov­ered by ei­ther life or med­i­cal in­sur­ance was largest, at about RM723,000 per fam­ily. (d) The av­er­age mor­tal­ity gap for each mem­ber of a fam­ily was be­tween RM100,000 to RM150,000. The re­sults of this study also in­di­cate the need for in­sur­ers to de­velop low pre­mium prod­ucts that have a wide reach to con­sumers at large. There is also an ur­gent need to look into suit­able re­tire­ment plan­ning prod­ucts for Malaysians. Although the gov­ern­ment has granted the in­sur­ance in­dus­try a sim­i­lar tax re­lief as the Pri­vate Re­tire­ment Scheme, the take up rate of de­ferred an­nu­ity is still low. There is a need to look into more cost ef­fec­tive dis­tri­bu­tion sys­tems to pro­mote re­tire­ment plan­ning, other than re­ly­ing on the agency chan­nel. In ad­di­tion to the above, LIAM and the in­dus­try need to con­tinue its ef­forts to raise the fi­nan­cial lit­er­acy of Malaysians. Ini­tia­tives such as ed­u­ca­tional pro­grammes, ad­ver­to­ri­als or ad­ver­tise­ments, ra­dio and TV in­ter­views are car­ried out by LIAM on an on­go­ing ba­sis. In this re­gard, LIAM has worked with a few news­pa­pers and a mag­a­zine to pub­lish var­i­ous ed­u­ca­tional ar­ti­cles on life in­sur­ance. The top­ics of th­ese ar­ti­cles ranged from gen­eral in­tro­duc­tion to life in­sur­ance, de­ter­mi­na­tion of proper sum as­sured, types of poli­cies and med­i­cal and health poli­cies. All th­ese ar­ti­cles are avail­able on the LIAM web­site at www.liam.org.my.

IN GEN­ERAL THE AV­ER­AGE PRO­TEC­TION GAP OF EACH MEM­BER (FOR A FAM­ILY OF 5 MEM­BERS) IS BE­TWEEN RM100,000 to RM150,000 THE AV­ER­AGE PRO­TEC­TION GAP FOR FAM­I­LIES (2 ADULTS AND 3 CHIL­DREN) WHOSE PRI­MARY WAGE EARNER HAS BOTH LIFE AND MED­I­CAL IN­SUR­ANCE WAS RM553,000 PER FAM­ILY

FAM­I­LIES WHOSE PRI­MARY WAGE EARNER WAS COV­ERED BY A LIFE POL­ICY ONLY AND NOT A MED­I­CAL POL­ICY HAD A SLIGHTLY HIGHER GAP, AT RM642,000 PER FAM­ILY

THE AV­ER­AGE PRO­TEC­TION GAP FOR THE GROUP HEADED BY A BREAD­WIN­NER WHO WAS NOT COV­ERED BY EI­THER LIFE OR MED­I­CAL IN­SUR­ANCE WAS LARGEST, AT ABOUTRM 723,000 PER FAM­ILY

AS OF END 2014 THERE ARE ABOUT 85,354 LIFE IN­SUR­ANCE AGENTS REG­IS­TERED WITH LIAM.

20,236 BANK EX­EC­U­TIVES REG­IS­TERED WITH LIAM.

Q What are the key fac­tors that could con­trib­ute to the suc­cess of life in­sur­ers in the near fu­ture?

Among the key fac­tors are:

Prod­uct in­no­va­tion. The in­sur­ers need to come out with prod­ucts that meet the chang­ing fi­nan­cial needs of its cus­tomers e.g. of­fer­ing more af­ford­able cov­er­age for re­tire­ment needs.

The de­ploy­ment of tech­nol­ogy for ease and con­ve­nience of ser­vic­ing the cus­tomers from the start of as­sess­ing their needs to of­fer­ing fi­nan­cial so­lu­tions and pay­ment of claims. Ex­pan­sion of dis­tri­bu­tion chan­nels to reach the dif­fer­ent seg­ment of con­sumers. The agency force is still the main dis­tri­bu­tion chan­nel in Malaysia, fol­lowed by ban­cas­sur­ance. As of end 2014, there are about 85,354 life in­sur­ance agents and 20,236 bank ex­ec­u­tives reg­is­tered with LIAM. Over the next few years, the revo­lu­tion in mo­bile de­vices, in­ter­net us­age and so­cial net­work­ing may change the way con­sumers (es­pe­cially Gen Y) connect, in­ter­act and trans­act with busi­nesses. With the ris­ing in­flu­ence and us­age of mo­bile phones and the in­ter­net, there is a need to ex­plore pos­si­bil­i­ties of adding th­ese to a com­pany’s multi-chan­nel dis­tri­bu­tion for in­sur­ance.

Cus­tomer Fo­cussed.

It is im­por­tant to en­sure that our prod­ucts are sold based on needs of the cus­tomers. In ad­di­tion, we need to train our in­ter­me­di­aries to pro­vide ap­pro­pri­ate ad­vice to our cus­tomers so that they can make an in­formed de­ci­sion of the in­sur­ance plan that they in­tend to pur­chase. Q Can you share the Malaysian life in­sur­ance in­dus­try’s ex­pe­ri­ences that have brought the in­dus­try to a higher level and can be of ref­er­ence to other play­ers in the re­gion? LIAM plays a piv­otal role in ad­vo­cat­ing pro­fes­sion­al­ism and high qual­ity of ser­vice of in­sur­ance com­pa­nies and dis­tri­bu­tion chan­nels. The con­sumer con­fi­dence that LIAM has nur­tured over the years should con­tinue to be a trade­mark of our re­spon­si­bil­ity to­wards con­sumer pro­tec­tion. We be­lieve that through the decades of our self-reg­u­la­tory ef­forts, we have laid a strong and solid foun­da­tion for in­dus­try guide­lines to com­ple­ment the reg­u­la­tions in­sti­tuted by the Gov­ern­ment.

Some of the ma­jor ini­tia­tives in­clude:

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