Policyholder Wins Claim Against Great Eastern

The High Court here has recorded a consent judgment between a 42-year-old cancer patient and an insurance company in a RM2.5mil lawsuit she filed against the latter. In the judgment recorded before Judicial Commissioner Liza Chan Sow Keng here on Monday (March 29), businesswoman Tan Siew Wei and Great Eastern Life Assurance (Malaysia) Bhd achieved a full and final settlement in one of the two insurance policies she is claiming for.

In the settlement, a sum of RM500,000 was to be paid by the defendant to Tan as a full and final settlement of all the claims and demands which Tan has against the defendant, in respect to the particular policy.

Tan, who was diagnosed with Stage 4 cervical cancer in 2019, had sued the company for rejecting her critical illness insurance claims on allegations that she had broken the policy clause with a non-disclosure on her mental state, where she was diagnosed with an anxiety attack in February, 2017.

She is suing the company to claim for RM500,000, which is the basic sum assured from the first life insurance policy, and another RM2mil, the basic sum assured from her second life insurance policy.

The court ordered for the settlement sum to be paid before April 1 and did not make any order as to costs. Neither party would have any further claim against the other after the settlement is completed. The policy shall be terminated with all the benefits and rights provided under the policy to cease. 

Sun Life - Google Growth

Sun Life surveyed 1,600 insurance agents and advisors from various insurance carriers in Hong Kong, Indonesia, Malaysia, the Philippines, and Vietnam between August and September 2020.

Optimistic - insurance advisors in Asia are generally positive about the economy and the life insurance industry, despite the impact of the COVID-19 pandemic. More than half (56%) are optimistic about the outlook of their country’s economy, while seven in 10 (70%) believe things will be better for the life insurance industry and their abilities to grow insurance sales in 2021. However, many also believe that the current environment of restricted face-to-face interactions will remain for quite some time. The study also found that health concerns are now top of mind, with 79% of advisors expecting higher sales of medical products and 77% expecting growth in critical illness insurance sales.

Digital Drive - another major finding was the pandemic is driving advisors to further embrace digital technology. A majority of respondents (59%) strongly believe they will use both digital and non-digital tools to communicate with clients in the future. The pandemic has also pushed advisors to look at new ways to prospect for clients and to use social media to promote themselves.

Across all markets surveyed, agents expect to operate in a physically distanced environment for at least another year, which means they will need additional support from insurers to help augment traditional sales and communications tactics.

Google - Sun Life announced it has partnered with Google to offer an integrated productivity solution to its advisors across Asia. According to Sun Life, using Workspace products including Gmail, Docs, Sheets, Slides, Forms, Calendar, Chat and Meet, will allow its advisors to communicate more easily with clients, automate tasks and work from anywhere. This, the insurer said, will give advisors more time to meet their clients’ needs.

AIA & Bank Of East Asia

AIA Group is nearing a deal to buy the life insurance unit of Bank of East Asia, the Hong Kong-based lender whose shareholders include American billionaire hedge fund manager Paul Singer's Elliott Management Corp. The insurance giant has emerged as the likely buyer for the assets. A deal could be valued at about US$600 million (S$807.6 million) to US$700 million.

A sale would be part of Bank of East Asia's efforts to boost profitability and lift its shares. The lender in September last year kicked off a process of divesting its life insurance unit and had attracted bidders including China Strategic Holdings, an investment firm backed by billionaire Henry Cheng. As part of the sale, the Hong Kong lender will also seek a long-term exclusive distribution agreement that could provide an ongoing source of revenue.

Bank of East Asia is one of the few remaining family-run banks in Hong Kong as the local lenders have been squeezed by larger competitors like HSBC Holdings and Bank of China. In 2009, China Merchants Bank bought Wing Lung Bank for about HK$17 billion (S$2.95 billion), while state-backed Yue Xiu Group completed acquiring a majority stake in Chong Hing Bank in 2014.

BEA Life, the bank's wholly-owned life insurance arm, grew its new premium income from whole life and annuity products by 9.5 times in 2020 from a year ago, according to the bank's latest financial report. That drove an 83 per cent increase in BEA's commission income from sales of life products.

Insurance Scam - Prudential India

India Government informed the Parliament on Tuesday (March 23, 2021) that the Insurance Regulatory and Development Authority of India (IRDAI) has reported receipt of 316 complaints from 250 policyholders in the last seven years alleging mis-selling of insurance products by some salespersons of ICICI Bank and ICICI Prudential Life Insurance Company.

The Reserve Bank of India (RBI) has also reported receipt of one complaint alleging the issue of insurance policy in place of Fixed Deposit. Government's reply came in response to a question on “whether Government is aware of complaints of fraud against ICICI Bank and ICICI Prudential for issuing life insurance policies to poor farmers in the garb of fixed deposits".

IRDAI has informed that the complaints were taken up and the ICICI Prudential Life Insurance Company has reported resolution of all 316 complaints. The insurance company has refunded an amount of Rs 2,93,62,385 in 254 cases while declining refund in 23 cases. Other actions taken by the insurance company for the resolution of the complaints also included the change of product in remaining cases.

In the case of selling of Fixed Deposit in lieu of insurance policy - RBI has reported regarding the complaint received that the premium amount of Rs 2,00,000/- received from the customer was refunded by the ICICI Prudential Life Insurance Company.

Singapore Largest Scam S$1 Billion

A businessman charged on Monday (March 22) has been linked to an alleged fraud involving at least $1 billion, the largest in Singapore's history. Ng Yu Zhi, 33, is the director of two firms and said to have raised the money from investors, purportedly to finance nickel trading.

The alleged victims were promised varying returns averaging 15 per cent over three months. But the nickel trades never took place and the investors are still owed the money. Ng, the director of Envy Asset Management (EAM) and Envy Global Trading, was charged with two counts of cheating and two of being a party to fraudulent trading involving about $48 million.

Life Insurance Claim Rejected - Due To Bad Faith

Self-employed woman contracts cancer. Claims under her income-protection insurance policy. Insurer cancels the policy after investigation reveals omission of unrelated health condition (depression) on her original application. She is accused of acting in bad faith and threatened with having to repay the money (A$24,000) already received. Her story comes to national attention. A dramatic court battle ensues. Justice is finally served.

Last week - in Federal Court, Chief Justice James Allsop found TAL Life, one of Australia’s biggest life insurers, had breached its duty to act with "utmost good faith" by cancelling a sick woman’s income-protection policy through the questionable practice of “retrospective underwriting”.

The Federal Court case was initiated by the Australian Securities and Investments Commission in December 2019. This followed evidence from the banking royal commission in 2018 showing the lengths TAL went to in seeking to void insurance policies.

Justice Allsop ruled TAL’s actions – including not informing the claimant she was under investigation, reaching a wrong conclusion, failing to give her a chance to respond, and threatening to pursue her for money – lacked "decency and fairness". 

The ruling carries no financial penalty, apart from TAL having to keep its end of the contract. The judgment is nonetheless significant. It puts insurance companies on notice about the use of retrospective underwriting, scrutinising insurance applications only when a claim is made, and covertly trawling through applicants’ medical and financial records to find any excuse to void the policy.

What is underwriting - Let’s briefly recap what insurance underwriting means. It is the process of assessing an applicant’s risk and pricing a life insurance policy (which includes a policy such as income protection) accordingly.

If you have, for example, a history of hypertension, you have a higher risk of stroke. This is something an underwriter wants to know, to accurately assess your actuarial risk. They may increase the premium you pay, or exclude from the policy claims for strokes, or decline cover altogether.

Insurance application forms typically require you to declare “yes” or “no” to a list of the most common medical conditions or circumstances, with an open-ended question about other “relevant” conditions.

Usually the underwriting process is straightforward. Insurers accept declarations in good faith, and approve applications (and collect the premiums) as quickly as possible.
Retrospective underwriting

But that changes when you make a claim - Then insurers are unwilling to accept anything in good faith. They typically require you to authorise access to your financial and medical records, including records you may not have seen – such as your doctor’s notes.

A doctor might note observations about a patient seeming depressed. It’s not an explicit diagnosis. But an insurer may retrospectively consider this undisclosed evidence of “depression”.

Finding “relevant” information not declared in the original application gives the insurer an excuse to “retrospectively underwrite” the policy – determining what policy it would have offered (if at all) had that information been known.

Retrospective underwriting usually favours insurers as it is done with the knowledge of an existing claim. The federal Insurance Contracts ACt allows insurers, under certain conditions, to cancel policies within three years of inception due to relevant non-disclosures or misrepresentations in applications.

Practical implications - It is not unusual for insurers to use a claims process to retrospectively underwrite. Often claimants only become aware of this when they’re told there is information giving the insurer the right to cancel the policy. Under the life insurance industry’s voluntary Code if Practice, isurers are meant to explain why they’re requesting information relevant to a claim.

The corporate regulator and consumer advocates have long held concers the three-year window to cancel policies encourages insurers to go on “fishing expeditions”.

No more spying - Since January 1 the rules giving insurers three years to cancel a policy have been tightened – from the banking royal commission the federal government has implemented. 

Insurers now may only “avoid a contract of life insurance on the basis of non-disclosure or misrepresentation if it can show that it would not have entered into a contract on any terms”.

The Federal Court ruling puts life insurers on further notice. It clarifies what the “duty of utmost good faith” required by the Insurance Contracts Act means.

They don’t need to behave dishonestly to breach that duty. Not meeting community expectations of decency and fairness is enough. That doesn’t leave much room for lesser signs of excessive suspicion, let alone “deep-dive” operations to dig for dirt. That’s all but been declared illegal.

Ouch Secures RM1.5 Million Funding

Malaysia-based insur-tech player, OUCH! , announced a successful US$364,600 (RM1.5 million) seed funding round from Vynn Capital and Temokin, along with a few unnamed angel investors. With the funding, the Ouch! team will focus on further product and business development and to prepare a stronger foundation for growth. 

Its efforts going forward will be directed towards improving the platform and service for users, as well as rolling out more features and upgrades to the platform across 2021. “Ouch! is very honoured to have gained support from such prestigious investors who have placed their immense trust in us,” said Shazy Noorazman (pic), chief executive officer (CEO) of Ouch!.

“This funding will allow us to build upon our current infrastructure and roll out more features to our customers for an even more holistic experience.”Shazy said with Ouch!, insurance can be more accessible now and customers can gain more confidence in insurance to protect their assets and their future instead of being intimidated by it.

Founded in September 2019, Ouch! is aimed at making insurance purchasing process simpler and fuss-free.Shazy noted that its research has shown that many people, especially youth and fresh graduates, are intimidated by the complicated terms and policies when purchasing insurance.

“Something as essential as insurance should not be confusing and should be as simple and straightforward as possible lest we turn off customers from one of the most necessary purchases in life.

“The experience should be as pain-free as possible, which also happens to be our tagline,” he said.According to Shazy, the platform features a simple interface, allowing customers to easily choose from five insurance categories, namely medical, life, travel, motor and home.The insurance options come from Allianz, AXA and Etiqa. Getting a quote for their insurance plans can be done within five minutes, the startup claimed.

Ouch! also pointed out that the platform deliberately utilises simple, easy-to-understand language to reduce confusion and to make things easier for first-time purchasers and those unfamiliar with insurance terms.The insurance platform also features a comprehensive policy vault for easy referencing and safekeeping.The company is slated to revamp its app in April and have plans to introduce “something big in the future.” 

It also has plans to raise a pre-Series A funding later in 2021, noted Shazy.

Guarantor Institution - Indonesia Shariah Insurance

The Indonesian Shariah Insurance Association (AASI) says that it fully supports the establishment of a guarantor institution for policyholders in Indonesia. The association had conducted discussions with the Ministry of Finance - OJK - regarding the need for a contributors' protection institution in Indonesia.

This agency is needed "because there could be a difference between Islamic insurance and conventional insurance in terms of operations or mechanisms". Meanwhile, the government is working on establishing a policyholders' protection institution. The 2014 Insurance Law requires the establishment of a policy guarantee agency (LPP) for the insurance sector by 2017.

In January 2020, Finance Minister Sri Mulyani Indrawati said that the government would formulate the legal framework for the establishment of the policy guarantee agency to protect policyholders against default by insurance companies. No details have been released as to the scope of protection to be offered by the proposed LPP.

AAJI's views - Separately, AAJI revealed that it had offered feedback to the Fiscal Policy Agency. One suggestion is that the products that can be guaranteed by the LPP should be insurance plans that have an element of protection. For example, for unit-linked products, the investment element cannot be covered because the investment is the responsibility of the policyholder. Meanwhile, the protection elements may still be guaranteed by the LPP, such as accident insurance.

Selling Unit-linked Policy During Covid - Indonesia

Only 12 insurance companies have obtained a licence to sell unit-linked insurance products (PAYDI) online. The 12 insurers represent 20% of the total number of life insurance companies in the country. The Indonesian Life Insurance Association (AAJI) says that in 2020 the number of life insurance companies that were members of the organisation was 59.

In November 2020, OJK granted the licence to nine life insurance companies, the first time such a licence was granted. Since then, only three more have qualified for the licence.

The chief executive of OJK's Non-Bank Financial Industry Supervisor (IKNB), Mr Riswinandi, said that the use of technology in unit-linked marketing is a vital factor in effecting online sales, especially during the COVID-19 pandemic. Unfortunately, there are only 12 companies that pass our vetting. Hopefully in the future, if insurers want to concentrate there [selling through digital channels], they will have prepared their IT capacity. OJK provides opportunities for insurance companies to prepare IT systems to support digital unit-linked sales.

Contestability Clause Life Insurance

When you purchase life insurance, the initial three years of the contract is very important. This is because of the contestability clause, which allows insurers to reject the death benefit claim if they find some intentional misrepresentations in the policyholder’s application.

A life insurance policy is purchased to provide financial security to the policyholder’s family members in case of any unfortunate circumstances like death or disability of the policyholder. But, if the death happens shortly after taking a policy, that is, within three years from the purchase of the policy, the contestability clause applies.

The contestability - period starts from the commencement of the policy till the end of the duration of three years (from the start date). This clause can significantly impact claim procedure and, hence, must not be ignored by buyers. The insurance firm can question the claim raised by beneficiaries if the policyholder expires within three years of buying the plan. “As per the contestability clause, the insurer can review the application and cancel or deny the claim in this period if any misinformation is found. 

The insurer will communicate in writing to the insured/nominee/legal representative/assignees of the insured, mentioning the grounds on which the decision to reject the policy has been taken.

For instance, you are a smoker but while buying a life insurance policy, you didn’t tell the insurer that you smoke. Now, unluckily, if you die within three years of the policy purchase, the insurer will have the right to investigate your past to verify the authenticity of the information you provided when buying the policy. If the insurer finds you (the deceased insured) gave wrong information, the insurer can reject the insurance amount claimed by your nominee/beneficiary.

It is, therefore, important to disclose all material facts correctly and in good faith to the insurer while purchasing life insurance.

Amendments - Insurance Act has now limited the scope of an insurer to question a life insurance policy after the expiry of three years from its purchase date. Further, it has built-in safeguards in favour of the insured, whereby the insurer will have to return the premiums paid if the insurer repudiates a life insurance contract within three years of the effective date on the grounds of misstatement or suppression of a material fact (except fraud). 

The amendment further provides that the misstatement of or suppression of fact shall not be considered material unless it has a direct bearing on the risk undertaken by the insurer; the onus is on the insurer to show that had the insurer been aware of the said fact, no life insurance policy would have been issued to the insured.

Malaysia Life Insurers Extend Covid Aids

A majority of life insurance companies in the country are extending financial assistance to their policyholders who may develop side effects or complications resulting in hospitalisation from Covid-19 vaccination.

Life Insurance Association of Malaysia (LIAM) said the coverage includes hospitalisations costs that were medically necessary and reasonable due to side effects from Covid-19 vaccination under the National Covid-19 Immunisation Programme.

A number of life insurance companies are also offering cash relief programme for side effects under their respective Covid-19 vaccine fund or medical assistance programme. The assistance includes reimbursement of medical bill for Covid-19 patients and post Covid-19 vaccination support for hospitalisation due to vaccine side effects; medical assistance and special death benefits; hospitalisation income; and cash relief.

Covid Strangles Hong Kong Life Insurance

Sales of life insurance policies in Hong Kong plummeted last year as border restrictions meant mainlanders could not visit the city to buy them. Total sales of new policies dropped 22.8 per cent from a year earlier to HK$133.4 billion (US$17.19 billion). That is the second-worst slump on record, after a drop of 25 per cent that followed the 2008 global financial crisis.

Mainland Chinese –the biggest spenders on Hong Kong insurance policies before the pandemic started early last year – forked out 84% less in 2020 as the outbreak brought cross-border traffic to a standstill. They only spent HK$6.8 billion (US$875 million) on life and medical insurance policies in Hong Kong, just 5.1 per cent of the total.

It is the smallest amount in a decade. At the peak, in 2016, they bought HK$72.68 billion worth of policies, representing 39 per cent of all premiums collected in the city.

The Insurance Authority blamed the plunge on cross-border travel restrictions that brought tourist arrivals to a standstill. Since March last year, overseas visitors have needed to be quarantined for 14 days – later expanded to 21 days – on arrival in Hong Kong, while mainlanders returning home would have had to undergo another 14 days of quarantine.

The number of mainland visitors to the city dropped 93.8 per cent year to 2.7 million last year, according to the Hong Kong Tourism Board.Mainland tourists must buy their insurance products in person in the city under the law, so the sharp fall in visitors hit the industry and its 100,000 salespeople hard last year.

The trend is expected to continue in the first quarter of this year as the city continues to battle the coronavirus, with a possible fifth wave of infections looming this week. Hundreds of people needed to be quarantined after some bankers and their families were linked to an outbreak at a popular gym in Sai Ying Pun.

DoctorOnCall Linked WIth Great Eastern Life

Malaysia's biggest digital healthcare platform is partnering with two major insurance companies to expand access to digital healthcare as COVID-19 cases rise.

DoctorOnCall was founded in 2016 and has become the country's leading digital health platform with 2 million people using its services, which include virtual consultations, online pharmacy, medication delivery, and specialist booking services.

Insurance companies Great Eastern Life Malaysia and Great Eastern Takaful Berhad are now partnering with DoctorOnCall to include telemedicine as an optional benefit in their suite of healthcare products.

With this partnership, their customers will be able to seek medical advice with a general practitioner and purchase medication through prescription online with free delivery. Customers are able to book an appointment with a specialist for online or in-clinic consultation, and also book a slot for home screening such as COVID-19 test and health screening, among others.

Malaysia's healthcare sector has been undergoing a digital transformation since 2016, when Microsoft Malaysia signed a Memorandum of Understanding with CREST (Collaborative Research in Engineering, Science & Technology) to develop a digital health hub.

In 2017 the Ministry of Health launched the Malaysian Health Data Warehouse to gather data from all government and private healthcare facilities in the country.

Last year DoctorOnCall signed an MoU with telecommunications firm Celcom, and the company has also formed partnerships with Prudential, Zurich, Allianz, Thomson Hospital Kota Damansara and Columbia Asia Hospitals among others.

Malaysia is 5 to 10 years behind in telemedicine as compared to countries like the United States, India and China.

Malaysia Robust Insurance Industry Albeit MCO

Malaysia’s general insurance industry was able to weather the COVID-19 pandemic in 2020, outperforming the country’s overall economy. While Malaysia’s GDP is expected to have dropped by 4.5% in 2020, general insurance premiums remained almost stable.

The decrease in GDP is a swing of roughly nine percentage points from the initial forecast of 4.4% growth for 2020. Despite the government giving economic stimulus packages of around MYR300 billion (SG$99 billion), the country is expected to have missed out on close to MYR200 billion in growth in 2020.

In contrast, the general insurance sector was hit by a 3.6% decrease in gross direct premiums in the first half of 2020, but by the end of the third quarter, the industry had recovered to a loss of -1.2%, with strong sales in the third quarter and recovery in the manufacturing sector.

The Movement Control Order (MCO), which sought to restrict the spread of the virus, significantly lowered loss ratios in the motor, health and travel insurance lines due to decreased activity. Restricted movement also hastened the digitisation of the insurance sector, with insurers harnessing technology to stay connected with customers, employees and agents. Insurers also benefited from digital transformation, especially in retail segments, as consumers became more digital-savvy, buying and managing their affairs through online channels.

As an industry, Malaysia's insurers are not convinced that the industry had been prepared for an event as the COVID-19 pandemic. However, insurers were mostly proud of how quickly their organization, the industry and the country responded to the extreme circumstances brought on by the pandemic. Both [general insurance and life insurance] industry associations and Bank Negara worked closely together to ensure the smooth continuation of services to policyholders. The introduction of a risk-based capital regime and the industry's early investment in IT also paid off as during the pandemic the industry’s performance remained robust.

Malaysia Takaful Insurance Gaining Traction

Malaysia’s takaful industry is likely to continue its steady growth in 2021 amid government initiatives and a supportive Islamic finance ecosystem, further propped up strong economic growth (forcasted at 6.7% in 2021), increased digitalisation, higher awareness and a low life-insurance penetration rate.

Malaysia’s vibrant Islamic finance ecosystem includes Islamic banks, sharia-compliant corporates, Islamic fund managers and halal industries that seek takaful products. Bancasssurance is one of the main distribution channels of takaful products. Takaful demand also arises from sukuk issuance, which makes up more than 60% of outstanding domestic issues and is often linked to projects and insuring the underlying assets. Takaful firms can also invest their liquidity in diverse sukuk and other Islamic options.

Takaful penetration is forfasted to keep rising, supported by government initiatives to provide financial assistance for the bottom 40% of income earners to purchase insurance and takaful coverage under the ‘Perlindungan Tenang’ scheme. Malaysian takaful continued to gain ground in the insurance market during the 2020 pandemic; it accounted for 38% of the domestic life insurance market in 1H20 (2019: 34%). General takaful accounts were stable at 16% of the overall general insurance market.

The takaful industry faced low top-line growth in 2020 due to a fall in new contributions under pandemic-related movement restrictions. Consequently, the contribution of family takaful to overall growth dwindled to 2% in 1H20, against 25% in 2019, while general takaful contributions rose by only 0.6%, from 20%. Nonetheless, takaful growth remained steady compared with general and life insurance contributions, which shrank by 3.6% and 12.6%, respectively.

Family takaful funds recorded a 28% drop in profitability in 1H20 due to unrealised losses from equity investments and lower new contributions. However, this was a smaller fall than for life insurance funds, whose profitability declined by 79%. The takaful sector’s capital adequacy ratio reached 240%, above the insurance sector’s 226%.

Murder Scam For Insurance Claim

Five fraudsters have been arrested in Nalgonda district on charges of being involved in fraudulent life insurance claims by killing people and projecting the deaths as due to road accidents, police sources said on Tuesday. The gang used to deliver forceful blows on the chest of the victims to kill them and later used different vehicles to run over their bodies, the sources said.

The fraudsters in connivance with family members of the deceased and others claimed insurance amounts from different private insurers to the tune of more than ₹1.59 crore after making road accident claims aggregating over ₹3.39 crore, Nalgonda district superintendent of police A V Ranganath said. The prime accused, who earlier worked in a finance firm, conspired with other accused and during 2013-2017 committed at least five offences--four murders and portrayed one natural death as accidental deaths.

They used to select sick people and those addicted to liquor and convinced their family members and also bought term insurance policies by paying a premium on their behalf. After killing such insurance policyholders, the accused used to portray it as accidental deaths to claim double insurance amounts from the insurance companies. After getting the insurance claim they later shared the claim amount with their family members and others.

However, the modus operandi came to light after police got information that on February 24 this year, a man was killed but it was projected that he died in a road accident. Police took up investigations and the medical and post-mortem reports revealed the cause of death of the man due to homicidal injury.

During the course of the investigation and after questioning the man's family members, the five were arrested. Police said they were also probing the role of others including insurance company inquiry officers, agents, a bank official and some village elders in the fraud.

Pos Life Care - Pos Malaysia & Allianz

POS Malaysia Bhd and Allianz Life Insurance Malaysia Bhd have together introduced Pos LifeCare, an affordable and accessible life insurance plan that provides death, and total and permanent disability (TPD) coverage.

The Pos LifeCare plan also offers additional benefits for accidental death or TPD, death due to dengue and Covid-19 infection, and hospital cash benefit in the event policyholders are admitted to the hospital for dengue fever - offering a premium from as low as RM0.14 per day.

Pos Malaysia has been connecting people and businesses for over 200 years. It has the largest delivery and touchpoint network in the country, which would widen the reach for life insurance.

Pos LifeCare is a basic plan which will be offered to all Malaysians aged 18 to 70 years old who walk into Pos Malaysia branches. The yearly renewable non-participating group term life insurance product under the Master Policy of Pos Malaysia is available now at all Pos Malaysia post offices nationwide.

In 2019, Malaysia recorded the highest number of dengue cases in four years at 130,101, compared to the previous historic high of 120,836 cases in 2015.

Separating Life Insurance From Banking

A group representing the life insurance industry says a decision by the Saskatchewan Court of Appeal will support consumer protection rules that separate banking from insurance.

The Canadian Life and Health Insurance Association says the court found a 2018 regulation prevents life insurance companies from accepting deposits and amounts unrelated to insurance coverage, marking a win in the insurance industry's fight with investment firms.

In the lawsuit, Mosten Investment LP had argued that Manufacturers Life Insurance Co.'s universal life insurance policy allowed for unlimited deposits and a guaranteed return. The case caught the attention of prominent short-seller Muddy Waters, which argued in 2018 that a ruling in Mosten's favour could lead to billions of dollars of losses.

But Manulife says it was successful in arguing that policyholders cannot make unlimited deposits into universal life insurance contracts and that deposits must relate to amounts required to pay the life insurance premium.

Mosten, says the firm is reviewing the decision, and is disappointed the court would permit governmental interference into a contract that was issued decades before the new regulations were passed.

Manulife says the legal matter did not have any material impact on the company's business, and shares of Manulife's stock rose more than one per cent on Wednesday.

Life Insurance & Loan Collateral

If you need to borrow money, using your life insurance as collateral could be a useful tool to help you secure funding. There are many different types of loans to choose from when large expenses arise, but they generally fall into two categories: secured and unsecured loans. While secured loans may carry advantages like better rates and a higher chance of getting approved, they come with one major stipulation: you will need to provide collateral. You could choose to use your vehicle or even your home as collateral, but doing so comes with a risk: if you cannot make the loan repayments, you could lose your car or house.

Life insurance may be a good choice for collateral, if your lender will accept it.

What is collateral assignment of life insurance - A collateral assignment of life insurance is a method of securing a loan by using a life insurance policy as collateral. If you pass away before the loan is repaid, the lender can collect the outstanding loan balance from the death benefit of your life insurance policy. Any remaining funds from the death benefit would then go to the policy’s designated beneficiary.

Why use life insurance as collateral - There are a few reasons why you might want to use life insurance as collateral for a loan. Here are just a few:

a: It can be affordable. Depending on your age, health, the type of policy and the value of the policy, life insurance costs vary. However, life insurance premiums may be less than what you would pay for an unsecured loan with higher interest rates.

b: Your personal property is safer. By using life insurance as collateral, you might be able to take out a secured loan without putting your home or vehicle at risk. If you pass away before the loan is repaid, the lender will use your life insurance policy’s death benefit to pay off the loan.

c: It may be attractive to lenders. Many lenders view life insurance as a good option for collateral, knowing that they will very likely have the money to pay off your loan in the event of your death.

Of course, there are also some situations in which a collateral assignment of life insurance is not the best option. Some people are unable to obtain affordable life insurance due to age or health complications. It can also be difficult to use an existing life insurance policy as collateral for a loan; a lender may require you to take out a new policy, specifically for the purpose of the collateral assignment.

Alternatives to life insurance as collateral - If you are considering a collateral assignment of life insurance, there are a few alternative funding options that might be worth exploring. Since many factors go into each option, working with a financial advisor may be the best way to find the ideal solution for your situation.

Unsecured loan - Depending on your situation, an unsecured loan may be more affordable than a secured loan with life insurance as collateral. This is more likely to be the case if you have good enough credit to qualify for a low interest rate without having to offer any type of collateral. There are many different types of unsecured loans, including credit cards and personal loans.

Cash value life insurance - Some life insurance policies accumulate cash value over time that you can use in different ways. If you have such a policy, you may be able to partially withdraw the cash value or take a loan against your cash value. There are implications to using the cash value in your life insurance policy, so be sure to discuss this solution with a life insurance agent before making a decision.

Home equity line of credit (HELOC) - A home equity line of credit, or HELOC, is a more flexible way to access funds than a standard secured loan. While HELOCs carry the downside of risking your home as collateral, you retain more control over the amount you borrow. Instead of receiving one lump sum, you will have access to a line of credit that you can withdraw from as needed. You will only have to pay interest on the actual amount borrowed.

Frequently asked questions - How do I take out a loan using a collateral assignment of life insurance? If you would like to take out a loan using life insurance as collateral, you should first first a lender willing to issue this type of loan. Once you have confirmed the lender’s requirements, you will have to decide whether you will use an existing life insurance policy (if the lender will allow it) or take out a new one.

If you take out a new policy, the application process is the same as applying for any other type of life insurance. After you have the policy, you will need to ask the insurance company for a collateral assignment form and fill out the paperwork noting your lender as an assignee. Generally, a lender will not be listed as a beneficiary. The beneficiary will be the person you would like to receive any leftover benefits not claimed by the lender.

What types of life insurance can I use as collateral for a loan - Any type of life insurance policy can be used to secure a loan. However, each lender will likely have different requirements. Make sure to discuss these requirements with your lender before purchasing life insurance with the intention to use it as collateral. If more than one option is available, you may want to compare the cost of premiums for each type of policy.

FWD - Stake In Asuransi BRI

FWD Group has completed its acquisition of a significant minority stake in PT Asuransi BRI Life, the insurance arm of Bank Rakyat Indonesia (BRI). Following the investment, BRI Life has entered into a long-term life insurance distribution agreement with BRI.

According to a statement by FWD, the investment and partnership will bring insurance to more customers in the highly underpenetrated, rapidly growing market of Indonesia. BRI Life will be able to leverage FWD’s digital infrastructure and expertise and help boost wider financial inclusion.

FWD also announced that BRI Life’s brand will remain unchanged and all existing customers’ policies will not be affected.

“This strategic investment is a clear signal of our confidence in, and commitment to, the Indonesian market where we see huge growth potential as one of Asia’s fastest-growing economies,” said Huynh Thanh Phong (pictured), FWD Group CEO. “We look forward to partnering with both BRI and BRI Life to deliver unique products and customer experiences that will change the way people feel about insurance in Indonesia.”

Established in 1895, BRI is a leading micro and consumer bank in Indonesia, leading the market in terms of total assets, loans, deposits and net profit. As of December 2020, it had more than 120 million customers.

Distributing Life Insurance Post Covid19

The COVID-19 pandemic is profoundly affecting how people engage with one another across industriexes and geographies. Physical distancing and other quarantine measures have shifted activities once considered critical to have in person to digital and remote channels. This change will affect insurance distribution—both in the near term, as physical distancing measures continue, and in the longer term. Indeed, society’s relationship with technology and remote interactions is continuously evolving and accelerating as we move toward the next normal. 

Many insurance companies have likely already taken steps to address short-term or immediate impacts of COVID-19—moving employees to a remote setup and expanding online customer service channels. Now, insurers are focused on the next set of challenges, including how to reimagine distribution in a more remote world. About half of the agents saw a more than 40 percent decrease in new business. 50 percent of agents cited remotely building new customer relationships as the biggest challenge during COVID-19.2 Online insurance aggregators and direct channels reported similar results. 

To address these challenges, insurers will need to rethink their distribution model across three dimensions: customers, sales force, and enablers (such as investment in data and digital tools). Doing so will empower them to prepare for the unpredictable.

How distribution is changing - Physical sales forces and intermediaries are responsible for the majority of insurance distribution across geographies and lines of business. While the share of business conducted via these channels has been shifting during the past decade as some customers migrate online, they remain the primary channels across life, commercial, and personal lines property and casualty. But continued physical distancing is having dramatic and immediate impacts on insurance distribution.

Shifting to digital tools - Agents accustomed to in-person interactions are rapidly recalibrating to provide uninterrupted service to clients who may be facing severe health or economic challenges. These agents are also rethinking how they build relationships with prospective clients as most rely on in-person meetings. About 90 percent of life insurance agents’ sales conversations and nearly 70 percent of their ongoing client conversations were conducted in person. During the pandemic - less than 5 percent of agents had any in-person conversations. Some 89 percent of respondents expect significant acceleration in digitization, and most also anticipate further shift in channel mix. The COVID-19 pandemic has increased customers’, agents’, and insurers’ desire for comfort around digital- and remote-interaction models and tools.

Moving toward self-service -  Client demand for self-service in the current environment has only accelerated the importance of digital. Digital access in insurance has increased since the pandemic began. But the level of customer satisfaction with digital delivery in insurance was the lowest compared with all other sectors. The number one reason for dissatisfaction was “hard-to-use tools.” Insurers will need to invest in expanding and improving self-service tools to better support customer and agent satisfaction. 

Transitioning offline processes online - Agents are currently navigating legacy products that sometimes require offline execution, such as physical signatures and medical underwriting. Most agents were dissatisfied with the level and function of signature capabilities at their primary carrier. Many customers, meanwhile, currently do not want to engage in a physical medical-underwriting process for fear of contagion. Insurers must then rapidly find ways of digitally underwriting the business—such as making better use of external data, relying on statements of good health, and adjusting fluidless thresholds to expand the number of customers who can forgo a physical medical exam—or risk losing it.

Changing distribution strategy in the near term - By now most insurance companies are thinking about how they should prepare during the near term to be ready for the next normal; many of these steps toward digital distribution are unprecedented. Their focus is mostly on digitally enabling sales forces and enhancing the use of data and analytics—especially for lead generation—to support customers.

Insurers can differentiate themselves in the evolving distribution landscape during the next several months by moving quickly to pilot, test, and learn rather than focus on multimonth strategy efforts; getting started is better than waiting for perfection. The goal is to return the business to scale fast, especially as knock-on effects of the virus become clear. Insurers should focus actions across three areas: customers, sales force, and enablers.

Take care of your customers - To understand how customer preferences have changed, insurers can use zero-based design to rethink existing processes, experiences, and products to be more appropriate for the next normal. This may mean simplifying products for remote sales; for example, traditional insurance products are too complex for digital sales (even with instructions). More broadly, understanding how to re-create the effectiveness of an in-person, advice-based relationship between successful agents and their customers in a virtual environment will be key. Insurers can look to advances in telemedicine—which have seen a dramatic uptick in recent weeks—with roughly half of their customers intending to continue using the service after the crisis subsides. Telemedicine tools (such as video for conducting appointments and photo- or screen-sharing) can help re-create complex, advice-based conversations virtually while also protecting consumer privacy and security.

Take care of your sales force - To prepare the sales force for the next phase, insurers can focus on three imperatives.

1: Launch a remote-only distribution force. Interest in remote distribution forces has increased in recent years and is even more relevant now. Remote sales forces have economic advantages from an insurance perspective: they generally allow agents to serve significantly more customers than traditional agents, resulting in lower commission costs per sale. Further, remote forces also allow insurance companies to own their sales messages more directly, enhancing their ability to respond cohesively in a crisis. Indeed, insurers can quickly update relevant scripts and talking points and more closely manage performance to ensure compliance. Insurance companies that have effective hybrid distribution forces may not need to worry about investing in a stand-alone remote sales force in the long term. By using internal sales desks and hybrid agents (that use both in-person and digital channels) or wholesalers, insurers that do not yet have remote or hybrid sales forces can transition remote capabilities to their skilled field sales teams that are likely more experienced in closing deals and building relationships.

2: Emphasize joining a team. While there is much discussion about teaming between insurers and agents, many agents have never worked with any team, despite evidence that agents in teams are significantly more productive. COVID-19 has showed the value of some system redundancy (that is, multiple agents able to access information on one client) to ensure continued operations should agents become sick. Furthermore, teaming brings together agents with different product expertise, which helps sales forces better serve diverse customer needs.

Insurance companies should ensure their commission system supports teaming by allowing split-commission payment or other incentives for joint work. Insurers also need to make sure different agents can access the same customer data and collaborate through customer-information-sharing tools. Finally, investing in virtual training on teaming best practices, sharing the findings with agents, or asking top agents who already work in teams to share their insights with others in their network can also help support this endeavor.

3: Expand distribution partnerships. As the current environment places an even greater pressure on making sales, now could be a good time to think about insurance marketing organizations or affinity relationships. Expanding distribution partnerships could help the sales force provide products to more customers in need while maintaining sales volume in a time of crisis. This approach becomes increasingly important as a virtual-agent model increases the pressure on agents to add value.

Invest in enablers - Investing in digital distribution now will have several important benefits for insurers, including increasing resilience through a potentially prolonged or multiwave crisis, responding quickly to current and future customer and agent demand, and increasing agent productivity. Agent appetite for digital tools has never been greater; Agents rated either agent digital tools or customer tools as the number one capability insurers can invest in to support them right now. Insurance companies can support agents in this area.

Another important enabler in distribution is data. Insurance companies typically have massive amounts of data locked in legacy systems or cabinets. Insurers should build capabilities to mine data so that they can identify and respond to customer trends, the more resilient their distribution mechanism will become. The value of data-driven lead generation has become increasingly clear in recent weeks as the typical in-person lead generation approaches (including in-person networking events and community events) of many agents are no longer an option. To tap into the value of their data, insurers can build advanced analytics models to identify lifetime value-based customer segments within their current portfolio. They can then build additional models for each segment to identify customers at risk of churning or lapsing as well as customers who might be candidates for cross-selling or upselling opportunities. The data can then be integrated into call lists to help agents (local or remote) focus their attention on the highest value leads. Insurers should also build a feedback mechanism to further refine the model building via qualitative input from agents as well as conversion data.

Agents said their biggest challenge right now was lead generation, but most agents unwilling to pay a percent of their gross income for quality leads. 

Planning for the longer term - Decide on the optimal go-forward channel mix. In-person agent forces will remain an important part of the distribution landscape in the years to come, especially in life and large commercial. But insurance companies need a setup that includes digital- and remote-sales-force options to serve customers who prefer digital or remote interactions. Having this flexible workforce increases resilience in the face of an unknown future. Setting up a remote agency can be done quickly through a pilot-test-and-learn approach, getting remote agents to interact with customers, and refining process based on feedback.

Be ready to make strategic M&A decisions to augment distribution - Fintechs and insurtechs are likely to be more open to conversations with insurers with large balance sheets because of the financial impact of the crisis. Insurance companies should proactively identify gaps in their distribution ecosystem as well as potential partnerships and acquisitions that could offer avenues to new customer types (such as digital natives), new product types (such as broader protection products), or new geographies.

Changing the distribution operating model will take time to implement, since it not only means employing new tools and assets but also requires substantial capability building that affects other parts of the value chain, such as products and claims. The distribution leaders that will lead in the next normal will be the ones beginning work on the longer-term imperatives today.