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A Lit­tle Some­thing for Every­one

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in risky en­vi­ron­ments and are vul­ner­a­ble to nu­mer­ous haz­ards, in­clud­ing ill­ness, dis­abil­ity, ac­ci­den­tal death, fire, agri­cul­tural losses, flood­ing and other nat­u­ral or man-made dis­as­ters.

They are least able to cope with any of the men­tioned crises. Al­though they have in­for­mal means to man­age risks, in­for­mal cop­ing strate­gies gen­er­ally pro­vide in­suf­fi­cient pro­tec­tion. It tends to only cover a small por­tion of the loss and they will need to seek sup­port from other sources.

Mi­croin­sur­ance is de­fined by its highly spe­cific cov­er­age de­signed for low-in­come groups to pro­tect against spe­cific per­ils in ex­change for a small reg­u­lar premium pay­ment pro­por­tion­ate to the cost of the risk in­volved. In this re­spect, "micro" also refers to a small fi­nan­cial trans­ac­tion that each in­sur­ance pol­icy gen­er­ates.

Gen­er­ally mi­croin­sur­ance is for per­sons ig­nored by main­stream com­mer­cial and so­cial in­sur­ance schemes. It also cov­ers per­sons work­ing in in­for­mal econ­omy with ir­reg­u­lar cash flow. An im­por­tant as­pect of mi­croin­sur­ance is that it can be de­liv­ered through dif­fer­ent chan­nels such as small com­mu­nity-based schemes, co­op­er­a­tives as well as con­ven­tional in­sur­ance agen­cies. There has been a case where a large in­sur­ance com­pany had ini­ti­ated with the United Na­tions De­vel­op­ment Pro­grammes (UNDP) to pro­vide in­sur­ance for the poor in coun­tries such as In­dia and In­done­sia. As men­tioned ear­lier mi­croin­sur­ance could cover va­ri­ety of risks, in­clud­ing ill­ness, death and prop­erty loss.

The char­ac­ter­i­sa­tion of mi­croin­sur­ance is by its prod­uct fea­tures and is fur­ther com­ple­mented by the def­i­ni­tion of mi­croin­sur­ance agents, those ap­pointed by and act­ing for an in­surer, for dis­tri­bu­tion of mi­croin­sur­ance prod­ucts only.

Bank Ne­gara Malaysia is pro­mot­ing mi­croin­sur­ance to the in­sur­ance in­dus­try through the “Mi­croin­sur­ance and Microtakaful: Dis­cus­sion Pa­per” pre­sented on April 18, 2016, which

A strong un­der­stand­ing among the low-in­come group of how in­sur­ance can ad­dress the fi­nan­cial needs is vi­tal for the growth of the in­sur­ance mar­ket.

pro­vides the reg­u­la­tory frame­work to fa­cil­i­tate mi­croin­sur­ance/microtakaful mar­ket growth.

It is an ini­tia­tive to pro­mote fi­nan­cial in­clu­sion i.e. to pro­mote de­mand for in­sur­ance and takaful pro­tec­tion amongst the low-in­come and lower mid­dle-in­come house­holds, which were oth­er­wise left out due to un­af­ford­able premium.

The im­por­tance of fi­nan­cial in­clu­sion is to en­sure bal­anced and sus­tain­able eco­nomic growth of Malaysia as the coun­try moves to­wards a high-in­come na­tion as ar­tic­u­lated in the Fi­nan­cial Sec­tor Blue­print 2011-2020. In Malaysia mi­croin­sur­ance is still at the early stages of de­vel­op­ment.

Bank Ne­gara has iden­ti­fied key chal­lenges and im­per­a­tives for a suc­cess­ful roll­out of mi­croin­sur­ance. The cen­tral bank is de­vel­op­ing a pro­por­tion­ate reg­u­la­tory frame­work to pro­vide a fa­cil­i­ta­tive en­vi­ron­ment for mi­croin­sur­ance mar­ket growth. The frame­work’s ob­jec­tive is to en­able the mar­ket growth and in­no­va­tion in mi­croin­sur­ance while main­tain­ing the prod­uct qual­ity and busi­ness sus­tain­abil­ity.

The avail­abil­ity of mi­croin­sur­ance prod­ucts is im­por­tant as an al­ter­na­tive cop­ing strat­egy by pro­vid­ing im­me­di­ate tem­po­rary re­lief in event of mis­for­tune, able to ac­cess fi­nan­cial re­sources and hav­ing peace of mind know­ing that fi­nan­cial re­lief is avail­able in an easy and timely man­ner.

A strong un­der­stand­ing among the low-in­come group of how in­sur­ance can ad­dress the fi­nan­cial needs is vi­tal for the growth of the in­sur­ance mar­ket. Hence, in­sur­ance ed­u­ca­tion is key to this suc­cess.

Mi­croin­sur­ance prod­ucts should ex­hibit the fol­low­ing prin­ci­ples namely; sim­ple and eas­ily un­der­stood, pro­tec­tion pro­vided is rel­e­vant to needs, premium/con­tri­bu­tion is af­ford­able, dis­tri­bu­tion chan­nel is ac­ces­si­ble, prod­uct fea­tures suit tar­get groups and all pro­cesses are timely.

In or­der to sup­port th­ese prin­ci­ples, the prod­uct should have fea­tures such as only max­i­mum of 3 risks cov­ered, first-loss or fixed-ben­e­fit ba­sis, sim­ple un­der­writ­ing, no ex­clu­sions, 15day free trial pe­riod and 30-day for both gen­eral/life in­sur­ance, 6-month wait­ing pe­riod for dis­abil­ity, nat­u­ral death and med­i­cal and health, no wait­ing pe­riod for per­sonal ac­ci­dent, on the spot is­suance of cer­tifi­cate, ded­i­cated call cen­tre, claims pay­out within 7 work­ing days of claim re­ceipt, im­me­di­ate par­tial or in­terim pay­out to meet ur­gent needs pend­ing full claims ver­i­fi­ca­tion.

The li­censed per­sons are al­lowed to ap­point agents to dis­trib­ute mi­croin­sur­ance prod­ucts and are called mi­croin­sur­ance agents. They are re­spon­si­ble to sell only mi­croin­sur­ance prod­ucts, may as­sist with mar­ket­ing, ex­plain­ing prod­uct fea­tures, ef­fect­ing the con­tract, claims sub­mis­sion, claims pay­out and pro­cess­ing rel­e­vant doc­u­ments for the clients.

In clos­ing, mi­croin­sur­ance will pro­vide a big op­por­tu­nity for in­sur­ance com­pa­nies who are will­ing to take risks in ven­tur­ing into an un­tapped mar­ket of the pop­u­la­tion.

Gen­er­ally mi­croin­sur­ance is for per­sons ig­nored by main­stream com­mer­cial and so­cial in­sur­ance schemes.

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