Takaful Reshaping Market

At least three Islamic insurers are considering disposing their general takaful business ahead of the Islamic Financial Services Act 2013 (IFSA), which comes into force next month.

The IFSA, which has been enacted but pending implementation, requires existing composite licence of insurers to be separated into two capitalised legal entities, namely life insurance or family takaful and general insurance.

It has been reported that the minimum capital for each company will be RM100 million.
Among companies that are mulling the sale of their general takaful business are HSBC Amanah Takaful (Malaysia) Sdn Bhd, Prudential BSN Takaful Bhd and Hong Leong MSIG Takaful.

It was reported that CIMB Aviva Takaful Bhd may also relinquish its general business now that it has been acquired by Khazanah Nasional Bhd and Sun Life Financial Inc, a life insurance company.

A takaful company executive said most bank-backed takaful companies' are not willing to pump the additional capital to set up a separate general takaful unit since the non-life segment is a small contributor to their overall business.

"These companies have very small general insurance business and it makes sense for them to forgo that business, which is rather small compared with their life (insurance) segment," he told SunBiz.

"Pumping more capital to keep an unprofitable or marginal general takaful business makes no sense for these companies. They would rather sell or surrender their general insurance licence than pump in more capital," said another industry executive.

The industry executive believes that the takaful operators will instead focus on retaining and building their life insurance or family takaful business, which is more profitable.

"Although Islamic insurers have a five-year period to segregate their life and non-life businesses, companies like HSBC Amanah Takaful, Prudential BSN Takaful and Hong Leong MSIG Takaful are already strategising plans to dispose their general business units," he said.

He added that apart from selling or surrendering their licence, insurers can consider various options to dispose of their general business.

"A companies may sell a stake in a new or strong foreign insurer before splitting the business later. A merger of the three or four general takaful companies could also happen."

OSK Research in a recent report said the IFSA coupled with the requirements of the Malaysian Competition Act may trigger mergers and acquisitions among takaful players as they attempt to pool capital and size in order to compete in the market.

"The IFSA is a way of forcing insurers to be serious about their non-life business," it said.

According to Bank Negara Malaysia's Annual Takaful Statistics 2012, of the RM5.88 billion net contributions income in the takaful industry last year, the general takaful segment accounted for only 0.1% of the country's gross national income and the family segment 0.6%.

The report also noted that the general takaful business only accounted for 15% of the industry total fund assets of RM2.7 billion in 2012.

There are a higher number of takaful insurers with composite licences in Malaysia than conventional insurers. Out of the 11 takaful insurers in the country, eight are with composite licences namely CIMB Aviva Takaful, Etiqa Takaful Bhd, Great Eastern Takaful Sdn Bhd, Hong Leong MSIG Takaful, HSBC Amanah Takaful, MAA Takaful Bhd, Prudential BSN Takaful, Syarikat Takaful Malaysia Bhd and Takaful Ikhlas Sdn Bhd.

However, the IFSA would not apply to the three takaful companies that secured the latest family takaful licences, which are not composite licences, in 2010, namely AmFamily Takaful, Great Eastern Takaful, and AIA Public Takaful Bhd.

Life Insurance Growth Malaysia

After a slowdown in the first quarter, the life insurance sector is expected to pick up steam for the remaining year underpinned by strong demand for specific products, good economic growth and a relatively low penetration rate of insurance in the country. In retrospect, he added that for 2012, the growth of the industry was underpinned by a solid performance in the investment-linked business, which grew by 20.9%.

Life Insurance Association of Malaysia (LIAM) president Vincent Kwo - said despite the overall slowdown in new business, investment-linked policies bucked the trend with an overall positive growth of 4.1% in the first quarter this year.

Overall, he said traditional policies continued to be slightly more preferred by consumers than investment-linked business with a take up ratio of 50.6% to 49.4% in the first quarter compared with 52.9% to 47.1% for traditional and investment-linked policies respectively in the same quarter last year.

Investment-linked products are more flexible and provide better transparency and are increasingly becoming consumers' preferred choice. There was also a huge demand for health and medical insurance due to the escalating cost of healthcare.

Furthermore, he said the penetration of life insurance was still relatively low in Malaysia at 43% while the demand for medical/protection-related products as well as savings-related products remained high.

For 2013, LIAM anticipates new business to expand at a rate of about 10%, taking into consideration the projected economic growth rate of about 5%.

Based on the data as at February 2013, new business' total premium in 2012 was RM8.20bil compared wiith RM7.92bil in 2011.

For takaful, he said Malaysian industry players remained confident that they would be able to continue to record more than 20% growth in 2013 in line with prior year's achievements, although on a global scale, contribution growth was at a decelerated rate of about 18% for 2011.

Ineffective Life Insurance

You've got the best of intentions in providing for your loved ones after you're gone, but your actions could come back to haunt them in the form of a bumbled life insurance payout if you're not careful. Here are five mistakes to avoid so that your beneficiaries get what they're owed - no matter what type of life insurance policy you have.

1. Lying on your life insurance application
They say the truth hurts, but it can hurt even more if you lie when you fill in a life insurance application. While it may be tempting to deny that you're a smoker, or that you've been treated for a particular disease or medical condition, you could find your policy null and void.

2. Failing to make premium payments and letting your policy lapse
Just because you miss a payment doesn't mean your policy is dead in the water. Life insurance companies typically offer policyholders a 30-day grace period for payment, and some companies extend that to 60 days. During that time your policy will still be in effect.

3. Failing to tell loved ones about your life insurance policy
If you never tell your beneficiaries about your life insurance policy, it doesn't mean the insurer won't pay them after your death, but it does make it a more difficult process. Most life insurance companies conduct database checks for the death of policyholders so beneficiaries will get paid, not all of insurers do so in a timely manner. That's why it's wise to be sure your loved ones know about your policy and where to find it after you're gone.

4. Not naming a secondary and final beneficiary
It is important to name secondary and final beneficiaries. If your primary beneficiary dies before you, policy proceeds will go to the second beneficiary you have listed, Rothschild says. If the secondary beneficiary has passed away when you die, then the death benefit goes to the final beneficiary.

5. In some cases, death due to risky behavior and suicide
Life insurance policies typically have a two-year exclusionary period for suicide, so your beneficiary typically would receive whatever you paid in premiums, but not the policy's face amount. So-called "suicide clauses" vary by insurer and are designed to discourage people from buying life insurance when contemplating suicide.

Takaful Great Potential

The 4th Annual World Takaful Conference: Family Takaful Summit Malaysia (WTC: FTS 2013) which began today in Concorde Hotel, Kuala Lumpur, Malaysia, witnessed a high profile opening with more than 500 Takaful operators and agents engaging in discussions on how to capitalise on the huge growth potential for the Family Takaful industry in Malaysia and discussed key strategies for positioning and supporting Family Takaful as the key growth engine for the Takaful industry in Malaysia.

The event, held under the support of Etiqa Takaful Berhad, highlighted the importance of empowering agents to be the driving force of Family Takaful growth.

Mr. McLean said that “whilst the focus on distribution has been to replicate the successes of the conventional counterpart through either the direct sales channel or bancaTakaful, the key to success lies in the development of alternative distribution channels. There are some unique and niche Takaful features that do require a concerted effort and ‘outside the box’ thinking to increase penetration rather than cannibalise the existing conventional customer base. This calls for harmonized and coordinated efforts by both the Operators and the Agents.”

Mr. McLean went on to say that “as the industry seeks to achieve a higher level of competitiveness, increased product complexity, business sophistication, service excellence and the global nature of competition are all demanding a greater depth and breadth of leadership, knowledge, competence and core skills from industry professionals - in particular, the agents – who are the core distribution channel for Family Takaful.”

Mr. Azman also said that “having a great understanding of consumer needs, Takaful agents, who are the face and image of the Family Takaful industry, have a significant role to play in the further development of the Takaful industry and it is essential that there is an ongoing dialogue between the agents and operators.”

Assessing the latest developments in the global Takaful landscape and analysing key challenges and opportunities facing the Takaful industry across the world, Sohail Jaffer, Deputy Chief Executive Officer of FWU Global Takaful Solutions noted that “Family Takaful contributions enjoyed a compounded annual growth rate of 32% in the period from 2007 to 2011 with Malaysia dominating both at the regional and global level. The contributions from Malaysia make up around 56% of the total global Family Takaful contributions.”

Etiqa Grows

The family takaful sector in Malaysia is expected to record a 20% growth in premium over the next two to three years, said Etiqa Takaful Bhd. Last year the segment registered total premiums of RM4.5bil, out of which 37% was contributed by Etiqa Takaful.

Etiqa Takaful chief executive officer Ahmad Rizlan Azman said the market penetration rate for the family takaful segment in Malaysia was still low at 11%, compared with conventional life insurance, which was at 55%.

“The growth of family takaful in Malaysia has outperformed the growth in conventional life insurance. Given the large untapped market that still exists and the low penetration rate, there is significant room for the growth of family takaful in the country,” he said on the sidelines of the fourth World Takaful Conference: Family Takaful Summit Malaysia, here yesterday.

The two-day event is a platform for market players to gather and share insights into the key challenges as well as opportunities in the Malaysian family takaful market.

Meanwhile, Rizlan said the anticipated growth in premium registration would also be enjoyed by Etiqa Takaful, as the company was the leading takaful operator in the country.

Etiqa Takaful commands 60% of the family takaful market and 50% of the general takaful sector.
Last year the company’s overall gross return premium amounted to RM2.4bil, out of which 60% was derived from the family takaful business.

Leader Or Follower

It’s hard to distinguish the leaders from the followers these days.  So many leaders are playing it safe, holding themselves, their teams and their organizations back because they choose to follow instead of lead.  

Leadership is about taking risks, seeing opportunities others don’t see, unleashing your passion, being entrepreneurial, working with a generous purpose and strengthening the promise of a better workplace culture.   It is concerning when leaders focus more on their titles and positions of authority – rather than acting upon the responsibilities and duties they get paid for and doing what their employees expect and need from them.

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We don’t always get what we want in life or work.  That is why we need good leadership – to help solve problems and provide guidance, navigate unexpected circumstances, cultivate growth and overcome hardships.  Leaders are not hired to monitor situations, play it safe and keep quiet when things get complicated.

Leaders make bad decisions for many reasons – because they rely too much on past experiences, are addicted to corporate politics, mismanage resources, don’t see opportunity – but especially when they don’t trust themselves enough to lead and decide to follow.

To help you evaluate the strength of your company’s leadership team (or your own progress as a leader), take a moment to observe if any of the following five characteristics are evident.

1. Signs of Complacency

Real leaders have strong backbones and are not afraid to confront and solve problems.  They speak up and are courageous enough to tackle any tension points head-on.  They are respected as leaders because they are able to make the most of a bad situation and turn a negative unexpected outcome into a learning experience to help their teams grow and better compete.
Leaders that play it too safe have grown complacent.  They may not be aware of it yet – but their complacency is losing them respect, trust and loyalty from their employees as well as other leaders in the organization.

2. Risk Adverse

Playing it too safe is a sign that leaders are becoming risk adverse.  They would rather just sit back and follow the status quo.  They don’t speak up for what they stand for and only address their true points of view when they believe there will be no consequences.
Leaders must view risk as their best friend.    It’s a natural part of leadership and real leaders are confronted with it each day.   Great leaders make difficult decisions every day.  They know how to make 30 decisions in 30 minutes.

How many times has your gut told you to take action during times of adversity but you didn’t?  Instead, you waited for those around you to take the calculated risks that you were hesitant to take yourself?   If this sounds familiar, trouble awaits.

3. Not Original

Great leaders have their own distinct style and approach.  They are known for how well they manage their personal brand as a leader. They create original content and stand out from the crowd for being authentic.   They don’t focus on self-promotion but rather on the promotion of others.   They know the advantages of being original and not mimicking the often outdated leadership styles of their colleagues.
Leaders know how to instinctually lead and lift others to be better and they are original in how they go about it.  Followers are afraid to be original and thus become leaches and loafers throughout their careers.

Are you more of a supplier or a distributor of great leadership?   Do you supply great leadership that is original, trustworthy and authentic?   Or are you a distributor of someone else’s leadership content, ideas, style and approach?  Have you created your own distinction as a leader?

Being original is critically important for the sustainable success of a leader.   How do you measure your originality?  Though you can be both a supplier and a distributor of great leadership, set a goal to be a supplier – at least 70% of the time.

4. Don’t Share Their Momentum

You know a leader is a follower when they don’t share their momentum with others.   It’s obvious when someone is looking for recognition rather than respect. They focus more on getting the credit for an idea, strategy or approach – instead of sharing credit with their colleagues.  They have hidden agendas that are all about protecting their domain and perceived stature.

Great leaders share the harvest of their momentum with others.  Sharing begins with trust and trusting yourself is a critical success factor in anyone’s career.

The wise man knows he will forfeit his fortune if he does not trust himself.  Followers lose their momentum because they don’t share it and thus stay stuck in a self-serving process.
Real leaders understand the importance of having everyone’s best interests at heart.

5. Deflect Accountability

Leaders become followers when they deflect accountability.   This is probably one of the most obvious signs that it’s time for a leader to step down.   You know that your leader is becoming a follower when they spend more time keeping track of their excuses and blaming others for poor performance, rather than holding themselves accountable to help others perform better.   This is especially true when leaders are the ones at fault but don’t want to expose themselves to their corporate hierarchy – it’s easier to blame their subordinates.

Leadership is about protecting your employees and helping them be successful.   Employees deserve to be led by leaders who understand that success comes most to those who are surrounded by people who want their success to continue.  Great management boils down to accountability and this is something that must always be clearly evident as you serve in a leadership role.

Transparency in Leadership

Tom Castellanos, president and CEO of East Coast Metals, Inc., has worked for years to build his organization through targeted, effective business leadership. As such, he has developed a strong understanding of the kind of business leadership that can successfully grow an enterprise.

Castellanos highlights the importance of leaders following through with the corporate values and procedures that they have put into place. Many individuals have doubts regarding the sincerity of leaders when it comes to doing what they say they will. Leaders may talk about strong corporate values, but some were quick to bypass them in the interest of the bottom line.

Less than 1 in 5 people believe business leaders will actually tell the truth when confronted with a difficult issue.

"What good is a business leader of they don't have the trust of their employees?" asks Castellanos. "How can clients trust a company if its own employees are not certain in the capabilities and integrity of their leader?

To me, strong business leadership is more than just making sure that things run smoothly; leaders are examples to the professionals who staff their organizations. As such, it is crucial that they act according to the values that they have set so that their employees will see how much stock is put into these ideas.

But the importance of acting with integrity goes beyond that. Leaders are tasked with building a brand that is trusted by clients and employees. Without a certain level of trust, neither are going to buy into the company's ideas or support it to the extent necessary for the organization to truly flourish."

Diabetes On The Rise

Malaysia has the highest number of diabetics in Asean with an estimated 3.6 million adults affected by the condition, said the country's Obesity Prevention Council, calling this statistic "alarming".

The number also puts Malaysia in sixth place in the western pacific region, said council president Jong Koi Chong at the fourth national diabetes conference in the Malaysian capital of Kuala Lumpur on Friday.

More than 15 per cent of the adult population was diabetic, according to the latest study in 2011,
almost double the rate of 8.6 percent in 2006, he said.

"That is not an achievement to be proud of and we must all work together and help educate the public on the importance of prevention and maintenance of the disease," he said

Sun-set Business - Life Insurance Agent

Over two lakh life insurance agents have lost their jobs in the first three quarters of last financial year.

The number of direct employees in the 24 life insurance companies too came down by over 2,000, as per the data available with the Life Insurance Council.

 

The number of agents fell to 21.62 lakh as at end-December 2012 from 23.78 lakh in the same period last year.

 

According to a top functionary of a private sector life insurance company, downsizing and cost-cutting by many players were behind the trimming of the agent force.

 

“The unfavourable regulatory environment, which began with new norms for unit-linked insurance plans in 2010, is largely responsible for this situation,” he said.

 

Industry experts feel that some agents might have also left the profession due to shrinking commissions.

 

In the first nine months of FY 2012-13, about 1,000 branches folded-up. The dip in new premium income since the third quarter of 2010-11 due to new norms for ULIPs has been forcing the insurers to cut costs.

 

The premium income in the first 11 months of FY13, for instance, too decreased by six per cent at Rs 84,501 crore, according to Insurance Regulatory and Development Authority data.

 

Some major insurers, including ICICI Prudential and SBI Life, reported a dip in premium income.

The industry outlook for the current financial year may not be very different.

 

“We expect the same trend to continue in 2013-14 at the industry level, though there may be variations in performance of individual companies,” P. Nandagopal, Chief Executive Officer, India First Life Insurance, said.

 

The business models, however, would be more efficient and intelligent compared to earlier, he added.

Life Agent Becoming Obsolete

The ubiquitous insurance agent is getting rarer by the day. Thanks to the introduction of a stricter syllabus and a tough business environment, over 10 lakh life insurance agents have exited the industry over the past four years.

Speaking on the sidelines of a seminar on insurance here, V. Manickam, Seceratary-General of the Life Insurance Council, said that life insurance companies have terminated over 36 lakh agents and hired around 26 lakh agents over the past four years. This marks a net decline of 10 lakh agents for the industry.

 

“Agency is the main channel for distribution in the life insurance industry. The fall in the total number of agents is a big challenge to the industry,” said Manickam.

 

The industry has seen a decline in new business premium collection for the past three years, particularly in the unit-linked insurance product (ULIP) segment.

Revamped ULIP Norms

After rampant mis-selling in 2010, the Insurance Regulatory and Development Authority (IRDA) revamped ULIP norms by increasing the lock-in period and cutting commissions on their sale for agents from an average of 15 per cent of the premium collected to 5-6 per cent. This led to a massive dip in ULIP sales and a shift in focus to traditional insurance products.

 

In 2011, the IRDA also introduced a new, tougher syllabus and examination pattern for those seeking to get an agency licence. This resulted in a big drop in the number of agents clearing the exam. The regulator identified the cut-off percentage of 50 as one of the major reasons for the fall in the number of agents. Subsequently, 35 per cent was made the minimum pass mark.

 

“Earlier, only 40 per cent of the agents appearing were able to clear the exam but after the reduction in the minimum pass percentage, over 80 per cent have been able to pass. So, we expect more agents to step into the life insurance industry from hereon,” said S. Roy Chowdhury, Member (Life), IRDA.