Agent Earn Less Than RM20K A Year

Figures show that 65% of insurance agents earn below RM20,000 per year. “We often think that insurance agents make big money. But their remuneration is below the average wage of a Malaysians which is RM33,000 per year,” said Deputy Finance Minister Datuk Donald Lim Siang Chai, quoting figures from the Life Insurance Association of Malaysia.

Meanwhile, the National Association of Malaysian Life Insurance Fieldforce and Advisers (Namlifa) called on Bank Negara to review outdated cost guidelines regulating life insurance agents.
Sethu said there 83,174 insurance agents in Malaysia.

Its president Sethu Karuppan pointed out commission rates have been capped since 1996. “The Operating Cost Control (OCC) guidelines which were introduced in 1996 for the benefit of policy holders, does not match inflation rates,” he said.

He also called for a review of the replacement of policy (ROP). “When policy holders want to exchange their old policies for new ones, agents will incur a penalty if there are too many requests for ROP. “The reasoning behind this was to prevent bad agents from tricking clients into buying new policies. said Sethu. He said Namlifa wanted the ROP to be reviewed so that agents were not penalised when a client wanted to change to a new policy.

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Most people will avoid this career that does not offer fixed regular income. The existing life insurance agency structure, compensation and distribution philosophy has not changed in tandem with market changes. Higher Commission or ROP will not help improve agent's income.

Agency Members of the life insurance industry must think and act outside the box to improve their income.

A few factors to consider :- 

Market Segmentation
The life insurance penetration for Malaysia is approximately 40%. But Bumiputera (Malay Muslim life insurance penetration is less than 10%). More than 60% of Malaysian are Bumiputera. Statistically, the life insurance penetration for non-Bumiputera is almost 100%.
Bumiputra market - especially young Bumiputera - offers huge potential for life insurance agents.

Product Differentiation
Life insurance agents must now diversifiy to offer life insurance products that meet the needs of Malay Muslim - namely takaful products and young Bumiputra needs. Sales methodology need to be modified to suit Malay Muslim culture and philosophy.

Distribution
We must recruit and develop Malay Muslim Distributor to distribute Takaful products to Malay Muslim market. Our distribution must be designed to compliment Malay Muslim's natural strength in networking and teamworking. In addition, our distribution channel must have the width and breath to penetrate deep inside the Malay heartland.

Compensation
Our Distribution Channel Structure and Compensation need to reward group effort (as compared to individual effort in the current traditional agency structure). In addition, our distribution structure must offer our Malay Distributor the opportunity to build permanent Business Asset (as compared to existing compensation formula focussing exclusively on revenue - commission & overridings).

Business Expansion
Our Malay Muslim entrepreneur have the talent and potential to expand this distribution business aggressively. Distribution system must be transformed - breaking down processes to simple and manageable step-by-step actions. We can then offer Business Franchise to potential entrepreneurs plus expand our business (logistically). 

Old actions will continue to get old results. Life insurance agents must change its business paradigm, structure, compensation and distribution to forge ahead. We can then subsequently attract (not recruit) the best and talented entrepreneurs to join our business / industry. Failing which, we will continue to scrap the bottom of the barrel and recruit rejects.