Insurance Industry Updates - Malaysia

Insurance companies in the country are aware of the need to adapt their product positioning and distribution strategies as they re-evaluate their overall propositions and offerings. Insurers in Malaysia can play a much bigger role within the country’s wealth management sector if they are able to embed advice into product distribution and offer more protection. 

To do this, however, means that agents need to provide customers with more insights and guidance, given that risk cannot be assessed or addressed without looking holistically at an individual’s financial situation.

In line with this, the transition from insurance agents to IFAs might be an important step to support efforts in strengthening the distribution force to create a point of differentiation.

And, being well-resourced, insurance companies can invest in building the competency levels of advisers in offering healthcare and insurance plans, for example.

Ensuring greater penetration of insurance is essential in Malaysia – if the industry is committed to achieving the target of 5% insured by 2020.

“The [growth] aspiration will come more from non-agency based channels like online, bancassurance and IFAs,” saysRaymond Lew, chief distribution and marketing officer atSun Life Malaysia.

Completing the wealth management jigsaw

Having large agency forces to date has enabled insurance companies in Malaysia to make healthy profits, even without the need to offer so-called advice. But the situation will not stay the same forever, especially as competition grows from other types of distributors – including the banks. 

Industry practitioners agree that products sold without some level of guidance for customers no longer work.

“Products dispensed without proper advice, and without proper interpretation and knowledge, can actually backfire in terms of the needs of the clients,” saysK R Raju, founder and adviser for Blueprint Group of Companies.

As a result, rather than waiting and potentially seeing their market share get diluted, insurance companies need to act quickly by positioning their offerings in terms of providing protection, suggests Lew.

This also necessitates a transition from relying on agents to more emphasis on IFAs as a key distribution channel.

“There are situations where, when we look at the overall financial plan of an individual there can be implications on cash flow, and in view of those challenges, we may have to look at [insurance] products which are cheaper but provide the desired coverage,” explains Raju.

At the same time, Lew predicts that agency forces will continue to dominate because they are aggressive, driven and proactive. “They go out there and try to educate customers.” 

 

Distribution differentiation

Distribution power is also important if insurance companies want to make the most of the opportunity in wealth management in Malaysia; differentiation is no longer at the service or product levels.

“At the moment, the challenge for insurance companies is distribution power,” saysPhilip Smith, chief executive officer of Zurich Insurance in Malaysia. 

“The biggest and most successful [insurers] are the biggest and most successful not because they have the product or better service, or because they have straight-through processing, but they have the distribution power.”

Capitalising on the right channels can also help providers to reach a wider and larger segment of the population.

For instance, many potential customers have low levels of financial literacy level and are likely to be either un-insured or under-insured. Insurance companies must therefore provide them with information to help them understand the products, not push any products, adds Smith.

In particular, industry players such as Raju believe that healthcare protection offers a lot of potential, given the rising costs combined with increased life expectancy over recent years.

Among the many products already available in the market, most have high margins for agents but limited value to customers. Instead, insurance companies need to offer more competitive health products.

To do this, however, means that agents need to provide customers with more insights and guidance, given that risk cannot be assessed or addressed without looking holistically at an individual’s financial situation.

In line with this, the transition from insurance agents to IFAs might be an important step to support efforts in strengthening the distribution force to create a point of differentiation. And, being well-resourced, insurance companies can invest in building the competency levels of advisers in offering healthcare and insurance plans, for example.

Ensuring greater penetration of insurance is essential in Malaysia – if the industry is committed to achieving the target of 5% insured by 2020.

The [growth] aspiration will come more from non-agency based channels like online, bancassurance and IFAs. Having large agency forces to date has enabled insurance companies in Malaysia to make healthy profits, even without the need to offer so-called advice. But the situation will not stay the same forever, especially as competition grows from other types of distributors – including the banks.

Industry practitioners agree that products sold without some level of guidance for customers no longer work. Products dispensed without proper advice, and without proper interpretation and knowledge, can actually backfire in terms of the needs of the clients. 

As a result, rather than waiting and potentially seeing their market share get diluted, insurance companies need to act quickly by positioning their offerings in terms of providing protection. 

This also necessitates a transition from relying on agents to more emphasis on IFAs as a key distribution channel. There are situations where, when we look at the overall financial plan of an individual there can be implications on cash flow, and in view of those challenges, we may have to look at [insurance] products which are cheaper but provide the desired coverage.

At the same time, Lew predicts that agency forces will continue to dominate because they are aggressive, driven and proactive. “They go out there and try to educate customers.”  Distribution differentiation

Distribution power is also important if insurance companies want to make the most of the opportunity in wealth management in Malaysia; differentiation is no longer at the service or product levels.

“At the moment, the challenge for insurance companies is distribution power. The biggest and most successful [insurers] are the biggest and most successful not because they have the product or better service, or because they have straight-through processing, but they have the distribution power.

Capitalising on the right channels can also help providers to reach a wider and larger segment of the population. For instance, many potential customers have low levels of financial literacy level and are likely to be either un-insured or under-insured. Insurance companies must therefore provide them with information to help them understand the products, not push any products. 

In particular, healthcare protection offers a lot of potential, given the rising costs combined with increased life expectancy over recent years. Among the many products already available in the market, most have high margins for agents but limited value to customers. Instead, insurance companies need to offer more competitive health products.