Global Insurers - Potential Losses - Tokyo Olympic

Global insurers face a hefty bill if the coronavirus forces the cancellation of the Summer Olympics in Tokyo, with estimates of the cost of insuring the sporting showpiece running into billions of dollars.

Japan has more than 200 cases of coronavirus, which has infected more than 80,000 people worldwide and killed around 2,800, mostly in China.

Japan's government has ordered numerous sporting events cancelled as it tries to contain the epidemic, but has pledged the Olympics, in which Japan has invested some $12 billion, will go ahead as planned from July 24.

But fears persist that the Games may be postponed, moved or even called off, a decision International Olympic Committee (IOC) member - was reported this week as saying would need to be taken by May.

Potential losses from cancelling an event will generally be higher the later a decision is made. If they have to cancel 2-3 weeks before the event start-date, they have spent everything they have to spend. If you have three months to go before the event start-date, they have an opportunity to save some event costs. 

IOC President said on Thurday the Committee is "fully committed" to the Tokyo Games. The IOC takes out around $800 million of protection for each Summer Games, which covers most of the roughly $1 billion investment it makes in each host city. Insurance sources estimated it would pay a premium of about 2-3%, giving a bill of up to $24 million to insure the Tokyo event.

The policy will cover for setbacks ranging from war to natural disasters.

Easily spread diseases like coronavirus are often excluded from standard event cancellation insurance, but the majority of large event policyholders would purchase communicable disease coverage. Allianz has agreed with the IOC to insure the Olympics from 2021 to 2028 but its CEO said last week the German insurance giant had no exposure to the Tokyo Games.

Local organisers, Olympics sponsors, merchandisers, hoteliers, car hire companies and travel firms also typically buy insurance, though it may not cover their full costs.

Munich Re said on Friday it was a provider of cancellation insurance for Tokyo, for an amount in the hundreds of millions of euros. Munich Re would not say whether the figure was more or less than its 250 million euro exposure to the 2018 Winter Olympics or if the policy covered coronavirus, citing confidentiality.

Analysts estimate the insured cost of the 2020 Olympics at $2 billion, including TV rights and sponsorship, plus $600 million for hospitality. Insurance sources say policies for most major sporting events are underwritten by Lloyd's of London or the broader London commercial insurance market.

Lloyd's insurer said that event cancellation insurance for the 2014 and 2018 soccer World Cups covered potential losses of $1.25-1.5 billion. Beazley and Tokio Marine Kiln (TMK) are among Lloyd's insurers to have insured or reinsured the Olympics in the past.

Malaysian Life Insurance Updates 2020

The Malaysian life insurance market is projected to grow from MYR46.7 billion in 2019 to MYR55.4 billion in 2023 in terms of gross written premiums, at a compound annual growth rate of 4.4%.

Term insurance, endowment and whole life products account for almost 90% of Malaysia’s life insurance business. Rising working-age population and government and regulatory initiatives towards affordable insurance products are among the key factors driving the market’s growth.

As of end-2018, the share of working-age population stood at 66.2%. This offers huge growth potential as 46% of the population still does not own life insurance products. 

In 2017, the Malaysian government launched an affordable insurance scheme, known as “Perlindungan Tenang”, which sought to make life insurance accessible for poorer segments of the population. Since then, leading insurers such have introduced micro-insurance products to tap into this segment. Many of these offerings also harness mobile and digital channels, due to the widespread adoption of smartphones and other devices in the country.

Malaysia’s insurance regulator and industry associations are working to promote insurance awareness, the report said. In 2019, a national strategy plan for financial literacy was launched to implement a large-scale awareness campaign.

Among the other goals the regulator has been pursuing is improving product accessibility. It is now mandatory for life insurers in Malaysia to offer standalone term insurance through their direct distribution channel – either own office or online platform, the report said. Due to their more affordable pricing, it is expected to help insurance adoption.

With focus on improving accessibility of insurance in the country, insurers will use technology to expand their reach and also offer affordable products.

Boost Free COVID-19 Insurance

Boost together with Prudential announced a joint initiative to help protect Malaysians by providing free COVID-19 coverage exclusive to Boost users.

Between 24 February 2020 to 30 April 2020, verified premium Boost users who are not existing Prudential and Prudential BSN Takaful customers will be eligible to enrol for Group Term Life Insurance coverage worth RM5,000 for free if diagnosed at one of the 26 hospitals designated by the Ministry of Health. To enrol for the free Prudential Life Insurance with special COVID-19 coverage, verified premium users simply need to tap on the ‘COVID-19 Coverage’ tile in the Boost app to opt-in.

The insurance coverage is applicable to those aged between 18 and 55 years old, limited to the first 200,000 successful enrolments and ONE (1) enrolment per user. Boost users will receive the status of the enrolment confirmation in-app within three (3) working days from the date of application.

RM15 Million Motor Claim Per Day

The general insurance industry registered a decline of 0.8% in 2019 with total gross direct premiums of RM17.41 billion, according to the General Insurance Association of Malaysia (PIAM), as it anticipates the general insurance industry will continue to stagnate for 2020.

Motor remained the largest class with a market share of 48.3% in 2019, followed by fire at 19.3%.

Motor insurance recorded gross direct premiums of RM8.42 billion with a drop of 0.4%. This is despite an increase in total new vehicle sales in 2019. The local automotive industry recorded 604,287 units of total vehicle sales in 2019 compared to 598,598 units in 2018.

Motor insurance have been registering underwriting losses for more than 10 years. Average premium per policy has been on a downward trend since 2016 while overall costs of vehicle repairs have risen owing to increases in motor spare part prices amongst other factors.

In 2019, an underwriting loss of RM335 million was recorded with RM5.48 billion being paid out in motor claims. On a daily basis, this amounts to RM15 million per day paid out by motor insurers for property damage, bodily injury and vehicle theft.

A major factor is the high accident and fatalities nationwide. Statistics shows that Malaysia has one of the highest road accident and fatality rates in the region.

PIAM said in the pricing of motor insurance premiums, it is important to reward the good risks and charge the bad drivers more. This means that a driver who is in a class that is more likely to experience road accidents should pay a higher insurance premium compared to a good driver with a clean record.

“PIAM is currently in discussion with the regulator Bank Negara Malaysia on the next phase of the motor tariff liberalisation to adopt a more equitable approach through the use of risk-based pricing models. There will be incentives for safe drivers with accident-free records,” Lee said in a statement.

In this way, PIAM hopes that the high risk drivers will be motivated to effect a change in their driving behaviour to enjoy the benefit of a lower insurance premium. The industry eagerly anticipates further liberalisation and look forward to the eventual opening up of the market.

Meanwhile, the number of stolen vehicles continued its downward trend in 2019 declining 21% from 13,581 to 10,729 vehicles for all classes. Since 2014, lesser vehicles have been stolen year on year.

Fire insurance grew 1.1% and maintained its position as the second largest class with gross direct premiums of RM3.37 billion. Marine aviation and transit insurance surged 5.3% with gross direct premiums of RM1.35 billion owing to a recovery in the offshore oil related sector. The miscellaneous class recorded a drop of 2.9% with gross direct premiums at RM2.08 billion.

Medical and health insurance declined 11.4% to RM 1.02 billion while personal accident insurance dipped 1.3% to RM 1.19 billion.

Medical claims have been on the rise owing to inflation and a host of other reasons. Malaysia has one of the highest medical inflation rates in Asean in the recent years. The expected increase in medical claims for 2019 was 13%.

A joint industry task force has been set up to better understand and address medical inflation. The critical issue for insurers and consumers is price transparency so that consumers can make informed choices on the cost of treatment.

Looking ahead, PIAM foresees that the Malaysian economy will experience weaker growth having recorded the lowest level of growth in the Q4 2019 at 3.6% since Q3 2009. Challenges in the operating and business climate remain. The current Covid-19 crisis will compound the situation further with a significant dampening impact.

Strong Sperm In Swimming Pool

A Indonesian child protection boss has claimed women can get pregnant from swimming in the same pool as men with "strong sperm". Sitti Hikmawatty made the statement during an interview, saying that women should be wary of the risk of unwanted pregnancies.

“There is an especially strong type of male sperm that may cause pregnancy in a swimming pool,” Even without penetration, men may become sexually excited [by women in the pool] and ejaculate, therefore causing a pregnancy," she said.

She went on to say that his type of pregnancy was more likely to happen if the women in question had reached an age of being sexually active.

“If women are in a phase where they are sexually active, [such a pregnancy] may occur. No one knows for sure how men react to the sight of women in a swimming pool.”

Sitti, is the Commissioner for Health of Indonesia's Child Protection Commission (KPAI), also went on to wrongly state that in the US, women who killed people but were going through PMS were acquitted of their crimes.

Ms Hikmawatty initially tried to defend what she said, saying it was based on a study, but later admitted that the study does not exist.

Asia InsureTech

The region’s largest insurtech hub is Singapore (17), followed by Indian cities Mumbai (16) and Gurgaon (10). Meanwhile, in terms of total funding raised, Shanghai takes the lead ($1.4 billion), followed by Gurgaon ($161.6 million) and Mumbai ($103.8 million).

Top Insurtech in Asia includes:-

ZhongAn Insurance - Total Funding: $836.2 million
ZhongAn Insurance is an online-only insurtech company in China that develops ecosystem-oriented insurance solutions in various consumption scenarios. As of June 30, 2017, it had sold more than 9.5 billion insurance policies. ZhongAn operates its core insurance system on its cloud-based platform Wujieshan. It has also developed advanced AI capabilities to strengthen risk management, optimize product features quickly, and enhance customer experience.

SingLife - Total Funding: $173 million
SingLife (Singapore Life), a life insurance company licensed by the Monetary Authority of Singapore, caters to the protection, savings, investment, retirement, and lifestyle needs of Singaporeans from all walks of life. It offers affordable term life insurance, critical illness and cancer plans. Its protection solutions are available to the retail segment both digitally and through financial advisers, and it also offers universal life solutions to high-net-worth clients.

CXA Group - Total Funding: $58 million
Headquartered in Singapore, Connexions Asia (CXA) Group is Asia’s first employee health and wellness ecosystem. It offers an award-winning benefits experience to more than 400,000 users across 600 companies in 20 countries. Using AI to address employees’ physical, mental and financial health risks, the start-up helps companies shift spending from treatment to prevention. CXA’s platform gives employees access to personalized health and lifestyle offerings. It lets employers use their existing healthcare and insurance spending to pay for flexible benefits, corporate wellness and disease management initiatives to improve health, fight chronic disease and cut costs while allowing for employee personalization using AI and e-wallet.

Coverfox Insurance - Total Funding: $47.3 million
Coverfox is an insurance broking firm authorized by the Insurance Regulatory and Development Authority of India (IRDAI) and is India’s biggest insurtech platform. The company provides insurance broking services online and has partnered with more than 30 insurance providers to deliver the best plans and policies at the best possible premiums. It offers bike insurance, car insurance, general insurance, health insurance, life insurance, travel insurance, and term insurance.

5. PolicyPal - Total Funding: $20 million
PolicyPal is a MAS-licensed insurance broker and exempted financial advisor and is Singapore’s first graduate from the MAS fintech regulatory sandbox. Its mission is to help people make the right choice for their protection needs and provide them with affordable financial products, including business insurance, car insurance, critical illness insurance, endowment insurance, personal accident insurance, pet insurance, travel insurance, term life insurance, and whole life insurance. Aside from its insurance broker business, PolicyPal has also been operating PAL Network, a blockchain protocol for the insurance industry, since 2017.

Ins For Renascence - Total Funding: $14.4 million
Ins For Renascence is a network technology company that provides industry-level solutions and technical services for internet insurance. The Shanghai-based start-up helps insurance companies improve risk competitiveness and customer service experience through risk control ratings and insurance product customization.

The CareVoice - Total Funding: $13.1 million
The CareVoice is a health insurtech company that delivers mobile-based and data-driven SaaS solutions to make the healthcare experience more consumer-centric. Although based in Shanghai, the company also has a localized healthcare platform for Hong Kong users and insurers. Woking closely with over 100 high-quality healthcare partners, The CareVoice offers an integrated and personalized experience to its members and generates valuable data for insurance companies. The start-up is a graduate of Chinaccelerator and Ping An Cloud accelerator.

PolicyStreet - Total Funding: $535,000
PolicyStreet is a Malaysia-based insurtech company that advances insurance and healthcare through tech. It was established to make insurance accessible and affordable for Malaysia, where 45% of the population don’t have insurance cover. PolicyStreet offers business insurance, life insurance, medical insurance, motor insurance, pet insurance, and travel insurance through simple contract options that clients can easily understand. The company’s insurance is commission-free, and it gives rebates on the part of its popular plans.

PasarPolis - PasarPolis is a leading insurtech company in Southeast Asia that is backed by Indonesia’s three unicorns: Gojek, Tokopedia, and Traveloka. The Indonesia-based start-up delivers custom insurance solutions via B2B and D2D distribution channels.

AppMan - AppMan was founded to help businesses develop high-quality mobile applications and later specialized in creating mobile apps for the sales process and BYOD projects for its insurance clients. The company employs around 70 analysts, designers, and developers. Its platform products enable insurers in Thailand to mobilize their sales agents digitally and shift from paper-based work to an automated process.

Big Potential For Indonesia Insurance

Premium growth in Indonesia's sharia insurance business will be sustained by the country's economic development, with government support as a key driver.

Amendment of a 2018 foreign-shareholding rule in January 2020 will make it easier for insurers to carry out a mandated spin-off of their sharia units by 2024. The amendment allows an insurer to spin off its sharia unit by exempting the unit from the statutory 80% foreign-ownership cap. The insurers are under no obligation for capital increases to be made in the 80:20 shareholding ratio, a relief for some of them.

Takaful industry is expected to also benefit from the concrete guidelines of the Indonesia Islamic Economic Masterplan 2019-2024 published by the government in May 2019. Government support is also crucial to smoothen the IFRS 17 transition as takaful operators remain uncertain over the interpretation and application of the rules to their business as the January 2021 implementation deadline draws nearer.

General and life sharia gross premiums rose 2% and 10%, respectively (2018: 4% and 14%), compared with 16% and 1%, respectively, for their conventional counterparts. Nonetheless, Indonesia has very low insurance and sharia business penetration. Life insurance penetration in Indonesia was around 1.5% in 2018, which was much lower than the rate in other emerging Asian markets. Lack of consumer awareness and understanding of takaful products constrain the sector's expansion.

Life Insurance Versus Annuity

Annuities are issued by life insurance companies, but annuities and life insurance strategies each have their own unique benefits and limitations. So how does an annuity differ from life insurance? Is one better than the other?

As with all financial product questions, there are no perfect answers...only bad sales pitches. So let’s take a closer look at both annuities and life insurance so you can fully understand how they might fit into your current financial plan.

Annuities: It’s All About Life - Annuities are built and designed to provide benefits while you are alive. Whether it’s guaranteed income, principal protection, interest rate CD type growth, long term care/confinement care, or mutual fund type growth with a tax deferred Variable Annuity, the type of annuity you choose will dictate the contractual goal that you are trying to solve for.

Most fixed annuities like Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs), Qualified Longevity Annuity Contracts (QLACs), and Income Riders attached to a deferred annuity are all structured to provide a stream of income for life...or a specific period of time.

Annuities were first introduced in the Roman Times to provide a lifetime pension type income stream to the dutiful Roman soldiers and their families. Lifetime income is the primary reason people buy annuities, and still is the only financial product that guarantees payments regardless of how long you live. It’s a monopoly that the annuity category owns.

Life Insurance: It’s All About Death - Life insurance is the best ROI (Return on Investment) you will never see. You’ll never see it because you will be dead! Life insurance provides a tax free death benefit that passes lump sum and probate free to the listed beneficiaries on the policy. It’s the best legacy product on the planet because life insurance financially protects your family when you die.

In my opinion, when you buy a life insurance policy...you should buy the highest death benefit with the least amount of money. It should be that simple, but there are many life insurance products available with many unneeded whistles, bells, high fees, and non-guaranteed sales promises. The most efficient and simple type of life insurance is called “term life insurance,” and that’s the most pro-consumer type available in my opinion.

Life insurance protects your family when you are gone. For most of us, that is a primary goal and financial plan box we all want to check off.

Guaranteed Issue vs. Full Underwriting - The vast majority of life insurance products involve going through the underwriting process. That means getting blood tests, submitting your medical records, etc. It’s a long drawn out process in most cases, but worth the effort in the end for that tax-free death benefit. A very small portion of the marketplace is guaranteed issue life insurance, but there are restrictions on the amount of death benefit you can acquire. If you can physically qualify for underwritten life insurance, you should choose that path.

Pretty much all annuities are guaranteed issue, which means that no underwriting is required. If you are alive and your cognitive functions are in order, you will be issued your choice of annuity. That doesn’t mean you need to buy one, but your health is not an issue with the application process.

Taxes - Death and taxes. Annuities and Life Insurance. With annuities you have to pay taxes on any death benefit. Life Insurance death benefits pass lump sum and tax-free to your heirs. Both annuities and life insurance pass outside of probate, and both are considered contractual legal tender.

For now, our friends at the IRS are in agreement with the tax-free nature of life insurance death benefits. That’s a good thing, and my advice to you is to take advantage of that legacy gift. I will guarantee that your family will thank you for life insurance being part of your overall financial plan.

Corn, Wheat, Annuities, Life Insurance - Corn, wheat, grains, precious metals, electricity, oil, beef, orange juice, and natural gas are all commodities. Annuities and Life Insurance are also commodity products and should be shopped with all carriers to find the highest contractual guarantee for your specific situation.

Risk Transfer Choice - Whether you choose life insurance for the ultimate legacy gift or choose an annuity type to solve for a specific goal, both are transfer of risk strategies. As part of your overall retirement plan, you would be transferring risk to the life insurance/annuity carrier. As we all get older, transferring risk becomes more attractive and makes financial sense as we transition to the next chapter of our lives.

Depending on your specific financial situation, transferring risk might make sense for you and your family. If so, annuities and life insurance strategies can contractually accomplish that goal for you.

Wells Fargo Fined US$3 Billion

Wells Fargo will pay $3 billion in penalties to resolve long-running investigations into consumer abuses that ran unchecked for more than a dozen years, costing the bank's customers millions of dollars, federal prosecutors announced Friday. 

The much-awaited settlement between the reputation-impaired bank and the Department of Justice is the largest yet in a slew of scandals that cost two Wells Fargo CEOs their jobs and generated billions of dollars in operating losses related to legal costs and government fines and settlements across all 50 states.

As part of the accords with entities including the Securities and Exchange Commission, Wells Fargo "admitted" it collected millions in fees and interest to which it wasn't entitled, harming the credit ratings of some consumers and unlawfully misusing the personal information of others, the Justice Department said.

The abusive practices persisted from 2002 to 2016, and had bank employees engaging in fraud, identify theft, falsifying records and forging signatures of existing clients to open unauthorized accounts.

The $3 billion fine being paid by Wells Fargo includes a $500 million civil penalty to be distributed to investors by the SEC.

"This settlement holds Wells Fargo accountable for tolerating fraudulent conduct that is remarkable both for its duration and scope, and for its blatant disregard of customers' private information," Michael Granston, a deputy assistant attorney in the Justice Department's civil division, said in a statement.

The goal of the accord is to "ensure that there is an adequate and an additional deterrent component to this type of fraudulent conduct," a senior Justice Department official said at a briefing for reporters Friday.

The nation's fourth-largest bank has already paid billions in fines and penalties for pushing employees to create phony accounts to meet ambitious sales goals. It had reserved more than $3 billion for legal issues in the second half of 2019.

It was only last month that bank regulators imposed their biggest fines ever on former Wells Fargo executives, including ex-CEO John Stumpf, for presiding over the San Francisco-based bank's abusive sales practices.

The accords announced Friday are the latest move in work to repair the bank's reputation by CEO Charlie Scharf, who took the helm in September and is reviewing operations in an attempt to turn the bank's fortune's around.

"The conduct at the core of today's settlements — and the past culture that gave rise to it — are reprehensible and wholly inconsistent with the values on which Wells Fargo was built," Scharf said Friday in a statement. "During the past three years, we've made fundamental changes to our business model, compensation programs, leadership and government."

In addition to damaging the bank's brand, the scandals have inflicted damage on Wells Fargo's stock, with its shares down 12% in 2020, putting its market value below where it was when regulators announced the abuses more than three years ago.

Former CEO and veteran Wells Fargo executive Tim Sloan, who once denied that the phony accounts were a problem, resigned in March of last year after a punishing appearance before Congress.

Among other settlements, Wells Fargo has since paid more than $1 billion to regulators for mistreating consumers, $575 million to 50 states and the District of Columbia and $480 million for a class-action suit filed by investors.

The bank's bad behavior became public knowledge in 2016 when Wells Fargo acknowledged it had opened millions of bank accounts in customers' names without their knowledge. It also charged customers unnecessary fees for automobile and home loans, and sold some of them unrequested insurance products.

The public outcry over the bank's handling of the scandal paved Stumpf's exit. Wells Fargo then faced more bad press as other consumer abuses emerged dealing with its mortgage lending and auto insurance business.

Friday's settlement, however, is not the final chapter in the saga, as Wells Fargo is operating under a growth cap on customer deposits imposed by the Federal Reserve, which has said it would not lift its restraints until the bank shows it has changed operations to prevent consumer abuses from happening again. 

CTOS Combat Scam

To combat the growing problem of identity theft, fraud and scams, CTOS launched its SecureID, a fraud protection and credit monitoring service. This newly included Dark Web monitoring service is the first of its kind to be launched by a credit reporting agency in South-East Asia.

Consumers who subscribe to this service will be alerted to any changes in their credit profiles such as new credit applications, missed payments, credit limit changes, closure of credit facilities, bankruptcy and litigation cases besides alerts on personal information found in the Dark Web.

This enables consumers to be more proactive instead of reactive in safeguarding their identity and managing their credit health.

CTOS Malaysia group chief executive office Dennis Martin said in view of numerous data breaches worldwide and with the growth of online transactions as well as digital footprints, there were more ways for our identities and data to be stolen.

“In the first six months of 2019,4.1 billion personal records were leaked globally due to data breaches. Many criminal elements use the Dark Web for the sale and purchase of people’s data, and our new monitoring tool allows us to alert consumers if their personal information is detected on the Dark Web. Additionally, the included takaful coverage provides peace of mind if you become a victim of fraud, ” he added at the unveiling of the service.

Also present were Cybersecurity Malaysia chief executive officer Datuk Dr Amirudin Abdul Wahab and actor Hisyam Hamid who is featured in CTOS’ special campaign.

“Today’s evolution of CTOS SecureID means that we have a service that helps safeguard consumers against fraud and scams and also helps improve financial literacy, in line with the Government’s mission to promote financial education and inclusion, ” said Martin.

Subscribers to CTOS SecureID will also receive the latest information on scams and fraud prevention tips, support for issues related to identity theft and four MyCTOS Score Reports a year.