Child Life Insurance

Do children need life insurance protection? Or is this another selling tactic by insurance agents to reach their quotas?

The primary purpose of life insurance is income protection. When the breadwinner of the family suffers an untimely death, his earning capacity is buried with him. Other family members may also be contributing to the entire household income, but since he provides the biggest share, the loss will be a big blow to the others. The family he leaves behind suffers an economic loss. There will be a drastic change in lifestyle.

If we follow this premise, then children do not need life insurance protection at all because they're not contributing yet to the household income (unless we're talking about child stars here).

Usually, parents purchase life insurance policies with the intention of creating a savings plan for their kids. Life insurance, after all, is one of the most efficient savings tools. Premium payments made will translate into maturity benefits after certain number of years. Parents can use this amount as college or wedding fund for their children.

What about the insurance side of it?

Child mortality, while rare, is not unheard of. Parents who lose their children cope differently. My secretary reported back to the office a week after her one-year-old son’s funeral. Being busy was her way of coping. I asked her to take the rest of the month off but she said it was the best way for her to heal.

Others may have different ways. They can go on an extended or indefinite leave, if they are employed. Or if they are professionals, they may stop working until they gain their bearings back.

If this is the case, income stops but the bills still come in. Expenses start piling. While banks may sympathize, the only thing they care about is their bottom lines. That is the harsh reality. If the parents have something stashed away, then that is a good thing. But what if they don't? Or their savings are not enough?

This is where insurance plays a role. When parents get life insurance for their children, they do so without the intention of enriching themselves. But faced with a tragic event, insurance proceeds come in handy. They now have funds to cover part or all of their bills. This will eliminate stress from collectors who call and bug them.

The proceeds will also allow them to recoup the expenses they incurred especially if their children had to go through medical treatment.

The next time an insurance advisor approaches you about buying insurance for your kids, do consider it.

One rule of thumb though: parents should be insured first before they start taking out insurance policies for their children.

Cancer Is The Number 1 Claim

CANCER is the main reason for claims made for life insurance and serious illness cover, a break-down of payouts made by Irish Life shows.The life company said it paid out €168m in life insurance and specified illness claims last year.

Cancer accounted for 44pc of life assurance claims and 58pc of specified illness cover claims to Irish Life in 2013.

More than half of life insurance claims for women were related to cancer and 41pc for men.

The figures come from an analysis of the claims book of Irish Life, and Canada Life. The Canadian company took over Irish Life last year.

The analysis shows that €112.4m was paid out for 1,714 life insurance claims last year.
Another €56.4m was paid out for 81 specified illness cover claims.

The average payment was €65,560 in respect of Life Insurance claims, and €69,638 for specified illness cover claims although the figures show wide variations in the size of claims settled.

Managing director of Irish Life retail Gerry Hassett said: “The scale of the life insurance and specified illness cover claims paid shows that it is crucially important for people to look after the interests of their dependants in the event of death and serious illness.”

Syarikat Takaful Malaysia Berhad

Syarikat Takaful Malaysia Bhd (STMB) which saw its net profit rose by 37% in 2013, expects earnings this year to be further boosted by its aggressive cash-back payout policy and higher take-up of its products by corporations and multinationals.

Group managing director Datuk Mohamed Hassan Kamil told StarBiz the company had set a good record of cash back payouts in the last five years and had disbursed RM137mil to customers and business partners.

“Given the positive growth of our general takaful business this year, we are definitely anticipating to disburse higher cash back payouts. Furthermore, we are continuing to offer the additional 5% cash back for certificates expiring in 2014 across all our non-motor products,’’ he added.

For 2013, STMB handed RM30mil in cash back payouts. Hassan said its competitive edge over other takaful and conventional players was its ability to offer customers a 15% cash back should they make no claims during the coverage period.

In a bid to establish a strong foothold in the local insurance and takaful sector, he said the company would continue to promote cash back payouts.

On the whole, he said STMB would strive to do better this year as the company’s performance was anticipated to be positive and remained encouraging across the entire business segments, especially the group family takaful.

The fact that insurance penetration in both the conventional and takaful sectors was still low meant there was plenty of room for organic growth to chalk up another year of healthy growth, he noted.
Its net profit in the fourth quarter ended Dec 31, 2013 rose 27.9% to RM41.5mil, mainly due to higher sales generated by both its family and general takaful businesses. Revenue improved to RM378.5mil from RM316.1mil a year earlier.

STMB proposed a dividend of 30 sen for the quarter under review compared with 10 sen paid out previously.

For the full financial year 2013 (FY13), its net profit surged by 37% to RM139mil from RM101.2mil previously, while revenue increased to RM1.7bil from RM1.6bil.

RHB Research Institute said STMB’s earnings for FY13 beat the research house’s and street estimates by 110% and 115% respectively, due to higher wakalah (agency) fee income recognition, and improved claims and expense ratios.

It is maintaining a “buy” call on the company, saying the worst is over for the retail portfolio as STMB is adding on its numerous bancatakaful partnerships to diversify its risks.

It expects the general takaful segment to fare better in FY14, given the improved economic outlook and the insurer’s unique cash back proposition.

RHB Research said cash back gave the company a competitive edge as it boded well for consumers amid the spiralling cost of living.

Asked if stringent lending guidelines introduced by Bank Negara in July last year to curb rising household debt would impact its bancatakaful business, Hassan said the impact would only be for a short term as banks would be able to come up with strategic business initiatives to move forward.

Moreover, the rise of Islamic loan products or syariah-compliant loans in the market provides a vast opportunity for the company to expand its bancatakaful business.

In July last year, the central bank launched macro-prudential measures involving the shortening of mortgage and personal loan tenures to rein in escalating household debt.

Currently, the bancatakaful channel contributes less than 40% of STMB’s total new gross contribution of both the family and general businesses combined.

Group family takaful business, on the other hand, contributes about 70% of total group gross contribution and the percentage is expected to be slightly lower this year as it grows its general business.

STMB, which has about two million customers, has about 745 retail and 2,101 corporate agents. It plans to recruit 1,200 retail agents this year.

New Framework - Limit Life Insurance

Product pushing, one of the main concerns in the insurance and unit trust business, will be further curtailed with the introduction of the new financial advisory framework that may come on stream this year.

According to industry observers, product pushing has been a menace in insurance and unit trusts for quite a while although efforts to stem it have, to an extent, lessen the occurrence but more need to be done in this area. This is because there is a quota which agents need to meet in order to maintain their agency contract, one industry watcher said.

Furthermore, they said the proposed framework would at the same time minimise the number of part time agents, whose number is significant at the moment and forms the bulk of the total agency force in the insurance and unit trust segments.

There are about 85,600 agents in the life insurance industry as at Dec 31, 2013 and a significant number of them are part timers. For unit trust consultants or agents, their number is close to 50,000 at present.

Association of Financial Advisers (AFA) president Alfred Sek told StarBiz that Bank Negara aims to raise the number of full time agents in the insurance sector to 50% by 2020 as stated in the recent Life Insurance & Family Takaful Framework concept paper.

He said a single licensing framework for financial advisory was in the final stages and various discussions with the Securities Commission (SC) and the central bank and relevant parties has been ongoing.

“We expect the framework to be implemented sometime this year.

“This will spare financial advisers for the need to have two separate licenses for insurance and investment consultations. One license will suffice and this will help reduce the compliance burden and address the confusion in the financial advisory industry,’’ he said during an interview.

He said AFA was also in negotiations with the regulators to make it a requirement for insurers and takaful operators to offer the entire range of products for financial advisers to sell without any form of restrictions.

The single licensing framework, once it kicks off, would be jointly regulated by Bank Negara and the SC, he noted.

Financial advisers as financial intermediaries came into the scene in 2005 and is currently regulated by the Financial Services Act (FSA) and Islamic Financial Services Act (IFSA).

The unit trust business on the other hand is regulated by the SC under the Capital Market Services Act. Sek said there were about 280 fully licensed financial adviser representatives in 19 financial advisory firms in the country.

With the proposed new framework, he said it would lead to a higher penetration rate for insurance and takaful from 54% (in 2012) to 75% in 2020. Over the last three years, the financial advisory industry saw total premiums transacted increase by an average of 21% annually.

Besides enhancing the level of professionalism of intermediaries to ensure proper advice are given to consumers, he said the framework would strengthen product disclosure standards and transparency.
On the main issues facing the financial advisory business, Sek said there has been quite a few cases where individuals “were masquerading” as financial advisers when giving clients advice. This, he said, contravened the FSA and was an offence; if convicted, offenders would be liable to imprisonment not exceeding eight years or a fine not more than RM25mil or both.

History & Value Of Takaful Insurance

Due to the rapid progress in the field of international trade and commerce, insurance has globally come to play a vital and significant role in the day to day lives of the people.

It may be helpful to analyse the background of Takaful as we embark upon a discussion of the system itself.

The Takaful insurance system is based on the principles of Islam. Hence, the followers are required to explicitly believe in the Holy Qur’an and Sunnah.

The Holy Qur’an was revealed by God to Prophet Muhammed (PBUH) in stages for a period of 23 years. Chapter 26 – Verse 26 of the Holy Qur’an sets out the position that the Holy Qur’an contains proofs, evidences, lessons, signs, revelation, information containing what is lawful and unlawful things and sets out the boundaries of the Islamic religion that make things clear showing the right and straight path. In the opening chapter of the Holy Qur’an in verse 6 it reveals that the guidance is in two folds – namely; Taufiq, those that are totally from God Himself opening once heart to receive the same and Irshad through the teachings by the messenger of the God Prophet Muhammed (PBUH).

According to Chapter 2 – verse 2 this guidance leads to the attainment of the status of a Muttaqun.The efforts made to achieve the stage of Muttaqun would assist to avoid bad or evil deeds and to progress towards performing good deeds. The Holy Qur’an whilst defining what are “good deeds” points out In Chapter 18- verses 103 and 104, to the deeds which are performed according to the teaching embodied in the Holy Qur’an and the Sunnah. Therefore, in summary, a Muslim essentially is required to follow the principles laid down in the Holy Qur’an and the teachings of the Holy Prophet in connection with his personal day to day life or his interaction with his fellow human beings regardless of the faiths they are committed to follow in regard to business or commercial transactions entered into or, for that matter in any transaction related to his life. It is a fundamental and obligatory duty on the part of a Muslim to lead a life without infringing the rules of piety.

The teachings and life style of the Holy Prophet referred to as “Sunnah”. The way of life of a Muslim is based on the Shariah law; the two primary sources of shariah law are the Holy Qur’an and Sunnah.

Ancient Arab civilisation reveals that they were under the tribal system. The elders of the tribes maintained discipline among their own tribes. In Roman civilisation this system was called pater familia. The Tribal heads in order to maintain peace and harmony ensured that the inter relationship among Tribals would prevail. The tribal members for their living engaged in trade and hunting. There were occasions in which a member of one tribal unintentionally killed the other tribal. Therefore, in order to maintain uninterrupted peace and harmony among tribes, the parental relative, based on the principles “Law of Equality Punishment” mentioned in the Holy Qur’an, reached a mutual understanding. This is the origin of the doctrine of “Aqilah” payment of blood money. The Prophet in his judgement with regard to a complaint against a member of the Huzail Tribe reaffirmed the foundation of this doctrine. From this doctrine evolved Takaful Insurance.

The concept of Takaful derived from the Arabic word “Kafala” meaning guarantee, bail, warrant or an act of securing one’s need. Therefore, Takaful means joint guarantee, whereby a group of participants agree to mutually guarantee each other against a defined loss. Hence, the doctrine of Takaful embraces the element of mutual protection and shared responsibility. The Takaful system is basically a system of mutual protection and shared responsibility which contemplated a situation where a group of people agreed to cooperate among themselves to establish a common fund for the purpose of mutual indemnity. In this system, the participants mutually contribute to a common fund with the intention of providing mutual indemnity in a situation where peril or harm occurs to anyone of the participants. Hence, the system of Takaful is to mutually indemnify, provide solidarity and mutual assistance among participants who have agreed to share the losses to be paid out from a common fund which is called as Takaful fund. Thus, the Takaful system following the principles laid down in the Holy Qur’an in Chapter 5- Verse 2, to help one another who is in need of help; designed to help the participants who may be in need or in hardship owing the peril befallen on them. The teaching of the Prophet explains that if one removes a worldly hardship of the other, God will remove from him hardship.

In this back drop, in a “Takaful system” there is no reference to a ‘policy holder’ and instead the beneficiary is called as participant. The entity which collects the common fund (Takaful fund) and issues the policy is referred to as “Takaful operator”. The intention of this scheme is to share responsibility and indemnify the losses and not to solely make profits. In regard of the profits made by the Takaful Operator, the principles of the Islamic Shariah are to consider it as a surplus fund and to distribute the same in the proportionate manner among the participants.

According to Islam whether in prayers, payment of charity (Zakat), performing pilgrimage (Haj) in performance of good deeds or in any aspect of matter the intention of person plays a crucial role. Similarly, in the system of Takaful, it is important to have the intention (Ne’aa), the utmost sincerity and to possess the knowledge in regard to cooperative risk sharing and mutual assistance.

In terms of the principles of Islamic Takaful system, Shariah imposes strict prohibition in respect of the transactions that are influenced by “Gharar” (uncertainty), Riba (Usury) and Maysir(Gambling).
The jurists unanimously have expressed their opinion in regard to the reasons for prohibition of Gharar. They take the view that the existence of gharar may deny the bargaining power for the contracting parties. Their view is based on the fact that the contracting parties should be placed in the same position to agree on a contractual obligations and therefore they should be in a position to make informed decisions and hence he ought to adequately understand the consequences of the contract that they are entering into. The Holy Qur’an in chapter 4 – verse 29 expressly states amongst the trading parties mutual understanding should prevail and further states ‘eat not up your property amongst yourself in vanities’. The jurists whilst further elaborating have stated that gharar is such that the nature and consequences are hidden. Takaful explicitly recognises the principles that the parties to the agreement need to be in a level playing field.

Mysir (Gambling) in verse 90 – chapter 5 of the Holy Qur’an is strictly prohibited. As several religious and social groups are on a daily basis articulating objections to the evilness of gambling, it seems that further elaboration seems to be unnecessary.

In an Islamic Insurance or Takaful, the concept of donation (Tabaru) is very much in existence. The contracting parties agree to set aside a part of their contribution as a donation for fulfilling obligation of mutual help, used to pay claims submitted by the claimants.

Takaful system is very much based on moral values and ethics. The dealings are required to be conducted in an open, transparent manner, with honest intention (in good faith), truthfully and with fairness. The Holy Qur’anic verses strictly emphasis the importance of individual responsibility to safeguard the principles of social maintenance.

In a Takaful Islamic system also it is necessary to make sure the legal capacities of parties, to determine the insurable interest and the principles of Indemnity, payment of premium, mutual consent which included voluntary purification and specific time period of policy and underlying agreement. The difference is non- payment of premium as per the agreement will not invalidate the policy as the whole purpose of scheme is mutual assistance and whereby by give solace to member participant when he is in genuine difficulty will bestow blessing on the Takaful operator for kindness and understanding .

The other important feature is constituting a Shariah advisory council or committee to assist the Takaful operator to conduct operation as per the Shariah requirements.

In summary, piety , commitment to the scheme of mutual assistance, charity , mutual guarantee, cooperative risk-sharing and profit sharing is required to prevail during the primary level and as well as re-Takaful arrangement. The Holy Prophet underscored the importance of the mutual help and cooperation among human beings. He further highlighted the importance of the duty cast upon in the individuals to help and assist the fellow human beings who stand in need of such help.

The noteworthy factor in a Takaful system is that the primary insurer (Takaful Operator) in order to cover its losses is expected to make arrangements with a retakaful provider which conducts business in accordance with the Islamic Shariah. Accordingly, under the Islamic Shariah, an arrangement made with a company which issues reinsurance cover not adhering to Islamic Shariah is explicitly prohibited.

The principle of Takaful is that all transactions carried out among the parties shall be strictly in accordance with the Islamic Shariah compliance

Heart Disease - UP

Sarawak General Hospital’s Heart Centre is admitting more and more women patients these days and the ages keep getting younger. The centre’s Cardiology Department head Dr Ong Tiong Kiam said cases of heart disease among women in Sarawak were escalating and this all pointed to society leading an unhealthy lifestyle.

While the centre was still trying to gather the data to enable it to draw up strong statistics, he said from the pattern of patients coming to the centre, women were now likely to be on par with the men with regard to having heart disease.

“Yes, it (number of women heart patients) is rising. Going by our patients at the centre, we now have more women than men admitted,” he told reporters at the Women’s Heart Day event here yesterday.
He said this was highly likely to be caused by the busy lifestyle women lead these days.

“You have more women who are smokers and there are also many who are busy with their careers that they don’t have time for exercise and take care of their health.

“They opt to eat out more often and you don’t know if they are eating healthy,” he said.
With poor eating habits and an inactive lifestyle, he said women would tend to suffer from diabetes and this further increased their risk of having heart disease.

Adding on, Sarawak Heart Foundation board of trustees member and consultant cardiologist Prof Dr Sim Kui Hian explained that with diabetes, the estrogen level in a woman would be affected and this increased her risk to heart disease.

It is learnt that estrogen and other sex hormones protect younger women who have not reached menopause against heart attack and stroke. Dr Ong added that the symptoms of heart attack in women were atypical, all the more reason for women to be aware of their health.

“Surgery on women are also harder because their vessels and tubes to the heart are smaller. But then again, the doctors these days are highly skilled to handle these procedures.”

The event, in conjunction with International Women’s Day and organised by Sarawak Heart Foundation and SGH’s Heart Centre, held a health screening for the public while spreading awareness about heart disease.

It also gave the public a chance to consult health practitioners about heart disease and its risks.
Each year, over 8.6 million women die of heart disease and stroke globally. In the US alone, one in three women has died of heart attack.

Bancassurance - Cheats

Plan your retirement well. Leave your savings in the hands of experts to let the money work for you. Get the most out of your savings or retirement funds.

Promoters of the plethora of financial products in the market are fond of dispensing such advice. Nothing wrong with that and most of the sellers are probably well-intentioned.

But it’s also good advice to not rush into buying a financial product until you are very clear about the benefits and the risks involved. If possible, read the fine print and ask a lot of questions before committing yourself.

A retiree has learnt a costly lesson for buying an insurance policy that looked “very attractive” but which he subsequently found to be very “lopsided” in favour of the promoters.

Wilson Koe, 56, said he would be more than RM20,000 poorer because he was taken in by the sweet talk of a customer service officer when he visited UOB to place an FD account.

Relating his plight to theantdaily, Koe said he paid the RM100,000 premium for five years upfront for the PRUhorizon policy by Prudential which guarantees RM200,000 upon maturity in 20 years’ time.

To his shock, he learnt that he would be getting back only about RM72,000 for surrendering his policy now, before the end of the first year.

“The customer service officer recommended this plan as an alternative…like not putting all the eggs in one basket.

“Thinking that I am covered for RM200K (death benefit) because it’s an insurance policy, I decided to sign up. So, the officer ran through the benefits (called Illustration of Total Benefits) but the Surrender Policy was never brought up,” he said.

Koe was given a RM3,000 rebate for paying the full premium in advance and as a sweetener UOB threw in an offer for FD placement of RM40,000 for three months with high interest.

“Now that I have time to digest the policy in totality, I am shocked to see that there is no insurance coverage but only death benefit.

“The longer you survive the better it is. Up to the first 10 years of survival, the death benefit is only RM132K. If I place RM100K in an FD for 10 years, say @ 3%, I would get more. Hence, without insurance coverage (medical benefits, etc), it is foolish to take up the policy,” he said.

“Now, the worst part is the surrender value where 70% of the premium paid is gone. I feel that the policy is a gamble...if you survive for 20 years then only you get the full benefit. In between, up to nine years, the policy holder gets back what he had put in and is punished severely for pulling out,” said Koe, who retired as a factory general manager last year.

Koe said his mistake was that he did not go through the details before signing up but he wondered how such a “lopsided” policy could have been approved by Bank Negara.

“As far as I am concerned, if it comes from an insurance company, how could it be without insurance coverage?” he said.

Koe said he was surrendering the policy because he needed money for some family emergencies.

“If I surrender now I will get back RM72K, but if the policy enters the second year I will get only RM57K,” he added.

“I hope other people won’t be so easily taken in by so-called retirement plans marketed by insurance companies,” he said.

Medical Fee Hike

Health concerns all and it does not come cheap these days. Falling sick is a double jeopardy for any individual. First you are bogged down by the illness, no matter how minor or severe, then you are hit with the medical bills and all other attendant care cost.

Loss of productivity, a lowered quality of life and financial constraints are just a drop in the ocean when one falls ill. Malaysia may boast of one of the best healthcare systems in the world, attracting hordes health tourists, but it has callously ignored the daily hardships endured by the middle class.

Middle income earners who make up the bulk of patients seeking medical attention from private practitioners and hospitals will have to now fork out more with the fee hike approved by the Health Ministry. Many will be forced to queue at government hospitals to get their medical needs met.

Ask any out-of-pocket paying patient and he will attest to the fact that over the decade, visiting a doctor in a private setting is an excruciating experience as not only are the fees burdensome but also prices of medicines and other supporting needs have been on the rise.

Though market forces may mitigate the inflation of professional fees, there is no guarantee that other affiliated services will not go up. Medicines cost far more today. Imagine if one suffers from chronic illness like diabetes, hypertension, liver or kidney failure, skin diseases and asthma, to name a few.

We must keep in mind that with the advances made in medical technology and human bio-sciences, doctors are prone to resort to defensive medicine, a trend that can be viewed as not healthy but essential to preempt any legal issues that may crop up.

Many unnecessary tests and diagnostics are being warranted which patients, more often than not, do not understand and are not made to. Thus the total cost of initiating a therapy or procedure will eventually cost an arm or a leg.

This practice is rampant in the private healthcare system, enabling handsome profits for shareholders of privately owned medical establishments.

Blow to the rakyat
One wonders if the Health Ministry is aware of such practices but then again, it may be of the opinion that it is the choice of the consumers.

The problem is our society by large is ignorant and does not take enough effort to educate themselves. Many believe that doctors are made in heaven and trust them implicitly.

One of the immediate repercussions from the hike is the possibility of more patients turning to government hospitals and clinics, especially those who can no longer afford private health care.

There are many government pensioners who would rather seek treatment in private settings to avoid the long waiting hours and lack of mobility in government hospitals. They visit local community doctors in private clinics and pharmacies to get their essential drugs and supplements. But with the fee hike, we can be assured that they will return to government-run hospitals and clinics.

Queues will be longer and the government health sector will be stretched further and overburdened. We will need longer clinic hours and more medical personnel to attend to the sick.

Overload of patients in government hospitals will be unavoidable and the fee hike will eventually back fire on the government.

The government should have looked all angles before making the decision.

Obviously stakeholders in the private sector will welcome the new amended schedule because of vested interest. But what was running in the minds of the policy makers from the government?
With Goods and Services Tax (GST) kicking in April next year, and with the uncertain terms in the Trans-Pacific Partnership Agreement (TPPA) on drugs, medical procedures and medical equipments, the Health Ministry may well have hammered the first blow on the people of Malaysia.

And for sure health insurance providers will jump on board the hike, and in tandem raise their premiums, again at the plight of the already burdened society.

More may choose not to continue their policies or even opt out as living costs escalates to unmanageable levels.