Takaful Durian Runtuh

Life insurers are eager to get a piece of the few hundred million ringgit business that will be offered to Islamic takaful insurance players to provide a RM30,000 protection against death or permanent disability for a RM50 contribution for each of the recipients of the government cash award as proposed in Budget 2014.

Based on a contribution of RM50 per insured with a total of about 7.9 million people to be covered under the Group Takaful Rakyat 1Malaysia (i-BR1M) scheme announced in the budget, takaful players can expect about RM395 million annual contribution under this scheme, which is expected to start next year.

Under the Budget 2014, the 1Malaysia People’s Aid (BR1M) to households with monthly income of RM3,000 and below will be increased from RM500 to RM650, while for single individuals aged 21 and above with a monthly income not exceeding RM2,000, the amount will be increased from RM250 to RM300.

Though lauding the move by the government, Life Insurance Association of Malaysia (LIAM), which represents the 14 conventional life insurance companies, hopes the scheme will be shared with its members and not exclusive to the takaful companies.

“It is further hoped that the government will also extend the i-BR1M protection scheme to all insurance companies so that the rakyat will have ample alternatives to choose from,” said LIAM president Vincent Kwo Shih Kang in a statement yesterday.

Kwo said life insurance companies with strong distribution channels will be able to provide their services to the people, especially those in the under served areas.

Though the government has not provided further details about the scheme — whether it is a personal accident product or a group term takaful product, whether one takaful company will underwrite the whole scheme or will it be shared, whether the takaful companies are sufficiently capitalised to undertake the risks — the news bode well for takaful companies and its future growth in Malaysia.

The BR1M programme, which was started in January involving a RM2.6 billion allocation, is expected to benefit 5.2 million households — about 80% of the total households in the country — with cash aid.

Calls made to takaful operators revealed that the news came as a surprise. “Our senior management is having a meeting about this,” said a representative of a takaful company who declined to be identified.

Malaysia Takaful Association, which represents the takaful industry, reported that family takaful registered new business gross contribution of RM3.5 billion in 2012, a 30% growth compared to the RM2.7 billion registered in 2011.

According to the Financial Stability and Payment Systems Report 2012 released by Bank Negara Malaysia in March 2013, the “total assets of takaful funds grew by 12.4% to RM19 billion, with total takaful contributions accounting for 13.6% of total premiums and contribution in the insurance and takaful industry”.

According to LIAM’s statistics as at December 2012, the Malaysian population was covered with RM1.02 trillion, 8% higher than the corresponding figure in 2011 of RM946 billion.

LIAM also noted that the life insurance industry registered a new business growth of 2.2% with RM4.3 billion weighted premium in 2012 compared to RM4.2 billion in 2011.

Life Insurance Agent Cheats

A former insurance agent claimed trial at the Sessions Court today to separate charges of cheating an insurance client and laundering the RM76,611 from the illegal proceed.

Lim Cho Yaw, 32, allegedly induced telecommunications analyst Farid Mohamed Sani, 38, to give him a cheque for the purpose of settling the victim's housing loan instalment. However, instead of giving over the cheque to insurance company AIA Berhad, he laundered the money by banking it into his bank account.

 

He was accused of committing both offences at a Maybank branch at Kuala Lumpur City Centre, Suria Kuala Lumpur City Centre here between April 27 and 28, 2011.

 

If convicted for the cheating offence, he faces 10 year jail, whippings, fine imprisonment up to ten years, whipping, and fine while the penalty for the money laundering offence is RM5 million fine or five year jail or both.

Alternate Distribution Channel

Life insurance sales strategies are in need of a change if insurers ever want to saturate the middle market.

That was the focus of just one session at the 2013 LIMRA Annual Conference held Oct. 21-22 in New York. Speakers Todd Silverhart, corporate vice president and director of insurance research at LIMRA, and Manish Bhat, MetLife's senior vice president of global brand and digital marketing, spoke to how middle-income households are less likely to buy life insurance even though they know they need it, and how partnering with retailers may be the future of life insurance sales.

Referencing the 2013 Insurance Barometer Study, issued by LIMRA in partnership with the LIFE Foundation, Silverhart noted that though most consumers understand the need for life insurance (85 percent), many will not purchase a policy. The reason? Well, there are many, but a few are noted below:

"People don't really understand what company they should be going with and what policy to buy," said Silverhart. "Procrastination is another factor of course."
So what are the triggers that prompt people to purchase a policy? According to LIMRA, those are:

• Life event (41 percent)
• Planning event (25 percent)
• Financial advisor intervention (24 percent)
• Work-related event (23 percent)
• Media (18 percent)
• Family/friends intervention (12 percent)

With that said, how do life insurers reach the elusive middle market?

The key here is "find them where they shop."

According to the barometer study, 17 percent of those polled said they would be willing to purchase life insurance from a retail outlet.

"Seventeen percent may not sound like a lot, but a 17 percent increase in sales is not small," said Bhat. "When Amazon started, how many people thought they'd buy their books there instead of a bookstore?"

Bhat then referenced an article that suggests the life insurance industry needs more modern distribution channels. The kicker? The article was from the Journal of Marketing -- dated 1959.
Bhat notes that demand is not the problem, as 50 percent acknnowledge they don't have enough life insurance.

"This is something we can't solve with more agents -- there's just not enought of them," said Bhat. "Something must change."

Knowing that much of the middle market customer base is at large retailer - offering life insurance through easy-to-use kiosks set up in the pharmacy section of some stores. Though still in its testing phase, MetLife has noted that it has become the largest term life insurance channel at MetLife by application volume.

Maybe it's time for an industry that has remained practically unchanged from the start to venture into parts unknown. A stagnant industry is a troubled industry.

"[Life insurers themselves] set up this life insurance buying process to be what it is," said Bhat. "We created the problem."

Now it's time we solve it.

RM1,700 A Month Income

It was reported in The Star in August 2012 that there are 83,174 insurance agents in Malaysia, and that 65% if them earn less than RM20,000 a year (RM1,700 a month). That means only 35%, or about 29,000, make more than that amount. This dispels the myth that most insurance agents make a lot of money. In fact, the insurance agents’ income quoted above is below the average salary of a Malaysian worker, which stands at RM33,000 a year (RM2,750 a month).
Life insurance commission rates have been capped since 1996.

A Pope We Can Respect

Pope Francis (pic) has ordered the German Roman Catholic prelate known as the "luxury bishop" for spending some 31 million euros (RM127 million) on a residence to leave his diocese for an unspecified period, the Vatican said today.

The move, just short of a resignation, was taken against Bishop Franz-Peter Tebartz-van Elst of Limburg two days after he met the pope to discuss the scandal in the German Church at a time when the pontiff is stressing the importance of humility and serving the poor.

A Vatican statement said the bishop "was currently not in a position to carry out his episcopal ministry" and that he was ordered to leave the diocese while an investigation and audit into cost over-runs is held.

 

The diocese will be administered in the bishop's absence by a vicar. The issue has been an embarrassment for the pope, who has called for a more austere Church and has told bishops not to live "like princes".

German media, citing official documents, said the residence had been fitted with a free-standing bath that cost 15,000 euros (RM 65,000), a conference table that cost 25,000 euros (RM108,000) and a private chapel that cost 2.9 million euros (RM12.6 million).

Takaful In Malaysia

The local takaful industry is expected to see some merger and acquisition (M&A) activities over the next few years due to the Islamic Financial Services Act 2013 (IFSA) which requires takaful companies holding composite licences to separate their businesses by mid-2018.

The challenge is going to come in a few years as the new IFSA now requires licences to be split for general takaful and family takaful while the minimum capital requirement is going to be RM100 million. Out of 11 takaful players in Malaysia, three are sole family takaful operators and the remaining eight need to split their businesses.

He added that with one of the entry point projects aimed at Malaysia being 75% insured by 2020, a key factor that will help spur growth of takaful players is the ability to provide products in micro insurance and micro takaful.

Looking at the broader market - takaful players and insurers can't just service the middle income to higher income group. You have to look at the lower income group and rural areas hence the ability to come up with those sort of products for the market place will be very important moving forward.

According to EY's report, Malaysia has emerged as the world's largest family takaful market, securing close to three quarters of its domestic market share. The maturity of established regulations across all areas of Islamic finance in Malaysia, including sukuk issuance, has made Malaysia one of the top destinations for global institutions seeking to tap into the strong demand for long-term investments.

The size of takaful assets as at end of March 2013 was RM22.85 billion while the net contribution was RM7.6 billion. Another measure of success is the penetration rate which has increased from 8% in 2008 to 13% in 2012.

MAA - A Balancing Act

MAA Group Bhd is in danger of losing its listing status as it may not have enough funds left following the sale of its conventional insurance arm – Malaysian Assurance Alliance Bhd (MAA) – to buy a new core business, said its executive chairman Tunku Datuk Ya'acob Tunku Abdullah

That's because the Practice Note 17 (PN17) company plans to use the balance sale proceeds to recapitalise the general insurance unit of its Islamic insurance arm, MAA Takaful Sdn Bhd.
"There is no regularisation plan (to regularise its financial condition) on the table now. It is impossible to ask for a regularisation plan because there is nothing we can buy,"

He ruled out MAA Group borrowing money to acquire a new business. As such, the group plans to ask Bursa Securities for a further extension to submit a regularisation plan "because we are not going to buy a new business". It has been granted an extension of time of up to Nov 30, 2013 to submit the plan to the regulator.

Tunku Ya'acob blames its problem on the new Islamic Financial Services Act, 2013 (IFSA) which restricts MAA Group's activities, as the holding company of MAA Takaful, to the financial services sector that is expensive and something that the group can ill afford.

"So what financial service businesses are there (that MAA Group can buy)? A bank? I can't buy a bank. Stockbroking (firm)? That is very expensive. I definitely don't want to buy another insurance company. So, what else is there to buy?" Tunku Ya'acob said in frustration.

He argued that MAA Group's predicament is unique as it is not financially distressed, but that its hands are tied by the IFSA.

Investment-linked Policy More Popular

Investment-Linked policies sold in Malaysia outpaced traditional life policies in the first-half of 2013 (1H13) garnering 52.4% of new business premiums compared to 47.6% for more capital intensive traditional life policies, according to the latest statistics by the Life Insurance Association of Malaysia (LIAM).

LIAM’s president Vincent Kwo Shih Kang opined the reason being the low interest rate environment is pushing consumers who are willing to take on more risks in order to get higher returns, and investment linked policies with its savings and protection elements present the freedom for consumers to choose their investment mix.

“With the recent new highs achieved in the local stock market, those policyholders opting for a higher equity component in their portfolio have achieved a decent return,” said Kwo.

The investment-linked new business recorded a growth of 4.8% for 1H while the traditional life business contracted 15.5% during the same period.

Investment-linked policies continued to outshine traditional policies in terms of growth with 49.5% of new business share in 2012, up from 45.6% in 2011.

Nonetheless, for new business premiums, the life insurance industry recorded a 5.9% decline on a weighted premium basis (commonly adopted method for measuring new business volume by adding 10% of single premium business to 100% of regular premium business) during the 1H13 to RM1.85 billion from RM1.97 billion recorded a year before.

“The overall new business performance of the industry experienced some adjustments due to portfolio restructuring that was undertaken by some of the industry players,” said Kwo.

The statement added that the total claims payout for the industry eased slightly to RM2.9 billion for 1H13 as compared to RM3.1 billion in the corresponding period last year.

A total of RM6.7 billion worth of life insurance claims were paid in 2012, a 19% increase over RM5.6 billion paid in 2011.

Kwo pointed out the penetration rate is at 41.22 % presenting a growth opportunity for the industry especially in line with the Economic Transformation Programme targeting 75% of the population to be insured by the year 2020.

Total sum insured for 2012 was RM1.02 trillion, an 8% increase over RM946 billion in 2011 while the average sum insured was RM34,700, and increase of 6.7% from RM32,533 in 2011, said LIAM in an earlier report.

The average sum insured of RM34,700 per capita against an ideal average sum insured per person should be around RM310,000 also presents growth opportunities for the industry.

Commenting on the 2H13, Kwo believes that the industry will bounce back and should be able to deliver a positive growth of 2%-5% for the whole of 2013.

It is customary for insurance companies to register a high new business premium figure for the final quarter of the year as agents would be selling more policies in that quarter in order to meet their quotas.

Go Rural For Life

Insurance companies have been urged to go rural to achieve a life insurance penetration target of at least 75 per cent of the population by 2020.

Deputy Finance Minister Datuk Ahmad Maslan said the penetration rate of life insurance remained low at 42 per cent and there is still a large untapped life insurance market in Malaysia. The benefits of insurance are still not understood by the rural community, especially in Sabah and Sarawak. Hence, the insurance penetration in rural areas must be increased.

Insurance companies should also take into account the huge untapped market of the Bumiputera community that can be leveraged to improve the financial inclusion rate.

The Malaysian population was covered with RM1.02 trillion sum insured in various forms of life policies, at an average sum insured of RM34,700 per capita for 2012, a year-on-year increase of 6.7 per cent as at Dec 2012.

General insurance industry registered a growth of 8.2 per cent in gross premiums to reach RM15.180 billion last year, with net premiums growing at a rate of 8.3 per cent to hit RM10.528 billion.

In terms of growth in new business last year, both life and general insurance sectors increased by 2.2 per cent to RM4.3 billion weighted premium and 8.2 per cent to RM15.180 billion in gross premiums, respectively.

Ahmad added that the average annual income of a full-time insurance agent had increased from RM65,000 to RM91,000 and the number of full-time agents had grown in proportion to the total number of agents, from 23 per cent in 2002 to 39 per cent last year.

Accident Assist

Persatuan Insurans Am Malaysia (PIAM) and the Malaysian Takaful Association have established Accident Assist, a helpline for motorists and members of the public seeking immediate roadside assistance in the event of a road accident. The number to dial is 1-300-22-11-88.

Operated 24 hours, seven days a week by Telekom Malaysia, the service aims to improve the overall process following a road accident by offering road accident victims timely roadside assistance, including help in obtaining towing services to approved workshops, and objective guidance on making a motor insurance or takaful claim.

Accident Assist currently only serves private cars within Kuala Lumpur and Selangor, but the pilot programme will be extended nationwide later this year, The Star reports. The call centre was set up following consultation with the police, Health and Finance ministries, the Attorney-General’s Chambers, the judiciary, consumer associations, Bank Negara Malaysia, the Malaysian Bar Council and the transport operators association.

Comprehensive policy holders, whose roadside assistance services are free-of-charge, will be redirected to their insurer when they call the helpline, while third-party, fire and theft policy holders who do not have accident assistance will be offered towing and repair services by PIAM’s approved workshops, the daily reports.

Life Insurance Versus Takaful Famili

A common question that many Malaysians ask when it comes to buying insurance is this: What is the difference between Takaful and Life Insurance? Basically, Takaful is based on Shariah (Islamic Law) principles, and the general concept of a Takaful is:

A group of people (in this case, policy owners) contribute a sum of money to a Takaful fund in the form of participative contribution (tabarru’). These policy owners will undertake a contract (aqad) for them to become one of the participants; by agreeing to mutually help each other should any of the participants suffer any form of misfortune, either arising from death, permanent disability, loss, damage, or any other such misfortunes as covered under the Takaful they personally undertake.

Here is a basic example of how Takaful works: Eg: Sharifah and Shafawati contribute RM100 a month to a Takaful fund for ten years. During that period of time, should any one of them suffer any misfortune (or death), the benefit will be taken out from the fund that they contributed to, and not from their individual accounts.

Issues	Takaful	Life Insurance
ACCOUNTS	For Life Takaful, there are two accounts, namely Personal Accident (PA), which is treated in line with the principles of al-Mudharabah; the other account is Participants’ Special Account (PSA), which is treated on the basis of al-Tabarru.	In life insurance policy, the collected premiums are credited into the account known as life insurance account or fund.
BENEFITS	Paid from the defined funds under joint indemnity borne by participants.	Paid from the funds legally owned by the company.
BONUS	Takaful contract specifies from the outset how the profits from Takaful investments are to be shared between the operator and the participants. This shall be in accordance with the principle of al-Mudarabah, and the share could be in the ratio of: e.g. 5: 5 or 6:4 or 7:3 etc. as agreed between the participant and the operator in the contract regardless of the amount of investment profit made during the year.	May offer bonus or profits in general terms only, especially with profit policies, i.e. there is no exact specification with regard to the profit-sharing in the contract. The rate of bonus itself can vary from year to year and is up to the discretion of the Board of Directors of the company.
CLAIMS	In a life Takaful policy, if the risk occurs, the beneficiary(s) shall have the right to claim the policy value from the PSA besides the accumulated entire amount from the PA. But if in this category of policy, the participant survives at the maturity of the policy, his/her claim shall be confined within the amount available in the PA.	In a life insurance policy where the risk occurs, the beneficiary (s) shall have the right to claim whole amount named in the policy. But in the case the risk does not occur, the insured shall have the right to claim the policy value at maturity together with the interest if any.

Buy Life Insurance Online

The Monetary Authority of Singapore has approved that basic life insurance products can be sold online by the middle of next year. The move, which will include a web aggregator, is a major change as financial advisers and insurance agents are the traditional model to buy life insurance.

In addition, agents' commissions are to be capped at 55% in the first year, with the rest spread over the next five years.

The revised remuneration framework is designed to make sure advice aligns the interests of the financial advisers with customers.

The Monetary Authority of Singapore's decisions came as it responded to recommendations made by the Financial Advisory Industry Review made in January.

Lee Chuan Teck, assistant managing director for capital markets at the Monetary Authority of Singapore, said, “This set of initiatives will transform the financial advisory industry by creating an environment where firms compete on the quality and value of their products and services rather than on the aggressiveness of their sales force. Consumers will be the ultimate beneficiaries of this change. MAS will review these measures periodically to see if more needs to be done.”

Singapore: Results Not Excuses

As the Government sets out to translate its strategic policy shifts into programmes that will improve the lives of Singaporeans, a major determinant of its success will be citizens’ trust, said Prime Minister Lee Hsien Loong yesterday.

He said the public service can strengthen this trust by working together as one, placing Singaporeans at the centre of its work and upholding the highest standards of integrity.

“Ultimately, integrity is not about systems and processes but values,” Mr Lee told 250 public service leaders gathered at its annual planning session. “The government must have a culture that doesn’t tolerate any wrongdoing or dishonesty and the public officers must have the right values — service, integrity, excellence — and each officer and the service as a whole must take pride in being clean, incorrupt.”

Calling on public service leaders to take the lead, the Prime Minister added: “This is your command responsibility, you cannot devolve it to your subordinates, you cannot leave it to your procurement or financial officers. You are the boss, you are in charge.”

The Public Service Division yesterday announced several measures to strengthen integrity within its ranks. From today, all public officers will need to declare within seven days whenever they visit the local casinos more than four times a month or if they buy an annual pass. For certain groups of officers, tighter rules will apply.

While the Government is adapting its structure to new needs, Mr Lee said issues will increasingly straddle multiple ministries, as they are inherently complex and inter-related. Thus, Mr Lee outlined three approaches that the public service should adopt, so that it can adapt to these changes.

First, he said that the public service has to present a “seamless and coherent experience” to Singaporeans, as it is “frustrating for the public to deal with multiple agencies and conflicting policies. And over time, the public will lose trust in the (public service) if it can’t figure out itself”.

Where Are You Heading

Billy Graham is now 94 years-old with Parkinson's disease. Leaders in Charlotte, North Carolina invited their favourite son, Billy Graham, to a luncheon in his honour.

 

Billy initially hesitated to accept the invitation because he struggles with Parkinson's disease. But the Charlotte leaders said, 'We don't expect a major address. Just come and let us honour you.' So he agreed.

After wonderful things were said about him, Dr. Graham stepped to the rostrum, looked at the crowd, and said, "I'm reminded today of Albert Einstein, the great physicist who this month has been honoured by Time magazine as the Man of the Century.

Einstein was once traveling from Princeton on a train when the conductor came down the aisle, punching the tickets of every passenger. When he came to Einstein, Einstein reached in his vest pocket. He couldn't find his ticket, so he reached in his trouser pockets.

It wasn't there.  He looked in his briefcase but couldn't find it. Then he looked in the seat beside him. He still couldn't find it.

 

 "The conductor said, 'Dr. Einstein, I know who you are. We all know who you are. I'm sure you bought a ticket. Don't worry about it.' "Einstein nodded appreciatively. The conductor continued down the aisle punching tickets.

 

As he was ready to move to the next car, he turned around and saw the great physicist down on his hands and knees looking under his seat for his ticket.

"The conductor rushed back and said, 'Dr. Einstein, Dr. Einstein, don't worry, I know who you are; no problem. You don't need a ticket. I'm sure you bought one.'

Einstein looked at him and said, "Young man, I too, know who I am. What I don't know is where I'm going.”

Having said that Billy Graham continued, "See the suit I'm wearing? It's a brand new suit. My children and my grandchildren are telling me I've gotten a little slovenly in my old age. I used to be a bit more fastidious. So I went out and bought a new suit for this luncheon and one more occasion. You know what that occasion is? This is the suit in which I'll be buried.

 

But when you hear I'm dead, I don't want you to immediately remember the suit I'm wearing. I want you to remember this:

 

I not only know who I am. I also know where I'm going."

 

May your troubles be less, your blessings more, and may nothing but happiness, come through your door. "Life without God is like an unsharpened pencil - it has no point."

Amen & Peace My Friends

And may each of us have lived our lives so that when our ticket is punched we don't have to worry about where we are going. Even at 94 years old, and with Parkinson's Disease, he can still deliver a powerful sermon!