Fix for in­sur­ance busi­ness mod­els needed

Muham­mad tells in­sur­ance in­dus­try that they need to be fixed

The Star Malaysia - StarBiz - - Front Page - By IN­TAN FARHANA ZAINUL in­tan­zainul@thes­tar.com.my

KUALA LUMPUR: The in­sur­ance in­dus­try’s cur­rent busi­ness mod­els are “bro­ken” and need to be fixed so that more Malaysians can af­ford cov­er­age, says Bank Ne­gara gover­nor Tan Sri Muham­mad Ibrahim.

He pointed out that most in­sur­ance prod­ucts in the mar­ket are too ex­pen­sive for the gen­eral pub­lic with the in­dus­try fo­cus­ing on a nar­row seg­ment of the pop­u­la­tion.

“From the per­spec­tive of the pop­u­la­tion that re­main un­der­served, the ex­ist­ing busi­ness mod­els are es­sen­tially bro­ken,” said dur­ing his key­note ad­dress at the Malaysian In­sur­ance Sum­mit 2017 yes­ter­day.

“If we elim­i­nate dou­ble-count­ing, only 35% of adults have some form of cov­er­age,” he added.

He also said the in­dus­try needed strong do­mes­tic play­ers.

“The in­dus­try needs do­mes­tic share­hold­ers that have a long-term out­look and can sup­port the deep­en­ing of our mar­ket,” Muham­mad said.

He chided re­cent op­por­tunis­tic share­hold­ing trans­ac­tions that have desta­bilised mar­ket play­ers.

“A num­ber of do­mes­tic share­hold­ers who af­ter be­ing given a li­cence and the op­por­tu­nity to par­tic­i­pate in the in­sur­ance sec­tor sold off their share­hold­ing and made quick prof­its,” he said with­out men­tion­ing any names.

“These types of share­hold­ers are a cause of in­sta­bil­ity to the in­sur­ers’ op­er­a­tions and not the kind of share­hold­ers that would be viewed favourably for fu­ture par­tic­i­pa­tion in the fi­nan­cial in­dus­try,” Muham­mad said.

The gover­nor also said the in­dus­try should pro­mote greater trans­parency and pru­dence in its busi­ness.

On pre­mi­ums col­lec­tions, Muham­mad said the cur­rent prac- tice where agents col­lected pre­mi­ums from cus­tomers in cash and made pay­ment to in­sur­ance and taka­ful com­pa­nies us­ing the agen­cies’ own cheque or credit card should cease.

He added that the in­dus­try fa­cil­i­tated cus­tomers to make di­rect pay­ments to the in­sur­ance and taka­ful com­pa­nies.

An­other is­sue raised by Muham­mad was un­der­in­vest­ment in do­mes­tic tal­ent in the in­sur­ance in­dus­try.

He said that be­tween 2014 and 2016, about RM1.3bil of pay­ments made by in­sur­ers in Malaysia to for­eign af­fil­i­ates.

“Among a large num­ber of for­eign in­sur­ers, sig­nif­i­cant re­liance on group level sup­port has lim­ited the in­vest­ments in core func­tions needed to de­velop strong do­mes­tic ca­pa­bil­i­ties,” he said.

To ad­dress the is­sue of un­af­ford­able in­sur­ance prod­ucts, Muham­mad said the cen­tral bank is part­ner­ing with the in­dus­try to roll out Per­lin­dun­gan Te­nang, a na­tional brand­ing and com­mu­ni­ca­tion plat­form next month in Kuch­ing.

“Per­lin­dun­gan Te­nang is in­tended to reach 8 mil­lion work­ing-age Malaysians and over 700,000 mi­cro-en­ter­prises that cur­rently need in­sur­ance and taka­ful pro­tec­tion against key risks.

“To date, four in­sur­ers and two taka­ful op­er­a­tors have de­vel­oped prod­ucts that will be in­tro­duced un­der this ini­tia­tive and we should ex­pect much more will come on board,” Muham­mad said.

Prod­ucts that meet the cri­te­ria of be­ing af­ford­able, ac­ces­si­ble and easy to un­der­stand will carry the Per­lin­dun­gan Te­nang logo and will ben­e­fit from reg­u­la­tory flex­i­bil­i­ties and co-brand­ing and pro­mo­tional ini­tia­tives.

By 2020, Muham­mad hoped that about 75% of the pop­u­la­tion would have some sort of in­sur­ance cov­er­age, from 56% of in­sur­ance pen­e­tra­tion at present.

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