Life Is About Trust

Malaysia insurance and takaful penetration rate is up four-fold from 11% in 1988 to 56% today, and the total paid-up capital of direct insurers has grown 12-fold from RM635mil to RM8bil over the same period, says Datuk Muhammad Ibrahim, Bank Negara Deputy Governor.

The Asia Pacific region, he adds, is also expected to be a strong driver of world insurance growth, with its share of the global insurance market likely to rise to 40% in the next five years.

To achieve the country’s targeted penetration rate of 75% by 2020, concerted and urgent actions are needed, he says, stressing that building trust is one of those actions that is vital.

Citing a global study, Muhammad Ibrahim says only 40% of respondents trust the insurance industry – the lowest ranked among 13 other business sectors. And a recent survey found that while consumers were given key information, the presentation was lengthy, with excessive information and technical or legal jargon that was difficult to grasp. There was also a bias in highlighting the benefits of a product by sales agents, while risks and costs were not adequately explained, he reports.

So effective disclosure by insurers is important, he says, as consumers require essential information about the main features and risks of financial products offered. The Bank is concerned with these findings and will act on them. We’ll also work with key stakeholders to increase public awareness of the importance of reading and understanding product disclosure materials and financial agreements,” he says, adding that a comprehensive review of the mandatory disclosure regime will be conducted soon.

The level of trust in the industry must be increased, he says, by:

Strengthening the capacity to fulfil ­objectives
Issues like fraud, theft, lingering court claims and settlement delays, if unresolved, dent the industry’s image. High-calibre leaders supported by a flexible and adaptable team is needed.

Refraining from making false promises and making clear the terms and ­conditions up front
Many consumers are not well versed with insurance and takaful terminology and will rely on agents’ advice. Agents must refrain from only disclosing favourable terms. And providing untruthful information is ­unacceptable. Trust goes when claims aren’t honoured.

Offering customised solutions that meet consumer needs
Meet changing individual needs and risk appetites. Marketing strategies must shift from product-push to an advisory model. Better service is needed.

Evolving with customer’s preferences and assisting them to make decisions
The industry must understand changing ­preferences and promote responsible consumer behaviour through education and awareness.

Balancing profitability with customer needs
Don’t be fixated solely on profits. Invest in relationships with customers.

Regularly benchmarking against the best
The industry must collaborate and develop its own indicators benchmarked against the world’s best.

Collaborating with others
Synergy creates new values and a multiplier effect on outcomes. Collaboration within the industry is important to drive efficiency and move towards a more competitive market that benefits consumers.

Bank Negara, Muhammad Ibrahim assures, will enforce regulatory requirements of fair consumer conduct. Besides private and public reprimands, the Bank can direct insurers to make restitution to the aggrieved parties, he says.

As a result of supervisory interventions by the Bank, more than RM30mil in premiums were refunded to affected policy-holders due to mis-selling practices in the sale of life insurance products in the past, he says.

The Bank has also directed insurers to refund the premiums in more than 700,000 cases involving the forced purchase of personal accident policies, he says.

And insurers were even directed to modify or withdraw misleading advertisements, make call backs to consumers to confirm products purchased without adherence to proper disclosure practices, and strengthen internal controls over sales and marketing practices.

These measures signal the Bank’s low ­tolerance for misconduct.

It also serves to remind the industry of the Bank’s expectation for common complaints and grouses such as delay in claim settlement and mis-selling practices by agents, to be eliminated or at the very least, reduced significantly.