Chinese Insurers - Challenges - Investment Earnings

Chinese insurance companies is facing challenges in maintaining their investment earnings amidst falling interest rates and significant volatility within the country's stock markets. Despite these hurdles, insurance firms under its purview have not significantly increased their allocations to higher-risk assets. This conservative shift in investment strategy is attributed to a more stringent capital regulatory environment established in 2022, which has led insurers to adopt a more cautious approach to risk.

Chinese insurers' investment yields in 2023 - During the first three quarters of 2023, several of China's major insurers listed on stock exchanges witnessed their investment yields fall short of their average performances over the past three years, despite a marginal improvement from the previous year. 

The aggregate annual investment return rate for Chinese insurance companies, excluding unrealized gains, dropped by 1.53 percentage points, settling at 2.23% from the previous year.

Chinese insurers' investment yields in 2024 - the investment returns are not expected to substantially recover in 2024 due to the persistently low interest rates and difficult investment conditions. The investment strategies of insurers in the real estate sector have come under scrutiny amidst ongoing concerns about the stability of Chinese property developers. Despite these challenges, insurers will face significant losses from their property investments, highlighting their diversified and moderate exposure to this area.

Certain life insurance providers have directed a portion of their assets into the real estate market, including investments in equity, fixed-income securities, and various non-traditional assets like trust plans and asset management products.

The firm estimates that the exposure of these rated life insurers to the commercial property sector is relatively low, generally a mid-single-digit percentage of their total investment assets. In contrast, non-life insurance companies show even less investment in commercial property, reflective of their shorter insurance liability durations and smaller operational scale.

Impact of China Risk-Oriented Solvency System - The introduction of the second phase of the China Risk-Oriented Solvency System (C-ROSS) in early 2022 has prompted insurers to tread more carefully in their investment activities, particularly in long-term equity stakes related to property.

The regulatory update has increased the capital requirements for such investments and included the acquisition costs of investment properties in the calculation of available capital, which has led to a more cautious investment posture among insurers.

While there has been a slight uptick in investments in policy-driven initiatives like social housing projects, aimed at mitigating distress within the property sector, these investments represent only a small portion of the insurers' overall portfolios. While these investments may align with government efforts to stabilize the property market, their immediate return potential may be limited, potentially placing further pressure on the insurers' return on assets.

Managing India Health Insurance

Patients admitted to hospital in India experienced delay dealing with insurance claims long after the treatment is over. Indian health insurance is notorious for a poor claims ratio, and “hidden” clauses that can result in partial coverage or sometimes denial of coverage. Improving regulation is an obvious fix to the problem. In addition - deeper reform requires aligning the incentives of patients, doctors and insurance companies, so that quality health care is provided at competitive prices.

Difficulties in providing health insurance - Insurance premium are calculated based on probabilities on hospitalization, claim, cost, investment returns and profit. This calculation goes awry if more than one person falls ill or if the procedure costs more than assumed probabilities. Example, there may be an unforeseen health catastrophe such as Covid-19, where the number of people falling ill shoots up unexpectedly. People may neglect early signs of their illness, not get check-ups as frequently as they should, or may demand more expensive care than necessary. The more healthy people may drop out of the pool and stop paying premiums, reducing the collective amount. Doctors and hospitals might also be incentivized to provide relatively expensive procedures, especially when they know that the insurance firm will bear the cost. As a consequence, the firm may scrounge on paying claims, or deny coverage altogether.

This simple example shows the number of things that can break down. There are incentive issues caused by “hidden information” in all transactions. The insurance firm cannot know if the level of care provided by the hospital is proportionate to the underlying condition. It has few levers to cross-check the decisions of either the customer or the hospital. The patient does not know if the hospital has overcharged or if the insurance company is misbehaving. The hospital and insurance company do not know if the patient neglected her health and could have come in earlier. In an environment where there is, often legitimate, mistrust between all stakeholders, it is no surprise that the results are sub-optimal.

Encouraging fair play - Weak enforcement, and poor grievance redress procedures lead to a lack of fair play in the health insurance system. These are an obvious fix to improve the working of health insurance firms and need to be taken up by the Insurance Regulatory Development Authority of India (IRDAI).

The deeper solution needs mechanisms that will align the incentives of all stakeholders in the system. Some potential solutions are as follows.

First - insurance companies could incentivize regular check-ups for their customers to save expensive hospitalizations later. However, experience suggests that customers are often not willing to undergo tests, and fear the potential increase in premium if the check-up reveals an adverse condition. Mandatory check-ups before access to insurance, especially for older customers, may be difficult to operationalize but offer a possible solution to keep costs low and also provide less intrusive healthcare.

Second - the design of protocols for health procedures may establish standards of care that hospitals should follow. This will allow insurance firms to evaluate whether the hospital is charging appropriately. Improving fair play in the medical establishment is as important as fixing the problems of health insurance.

Alternative - Another model used across the world is combining health care with insurance. This is known as the Managed Care model. In this model, insurance firms and health care providers form a network through which preventive care is emphasized. An example of such a model is the Kaiser Permanente in the United States. 

Establishing institutional frameworks where potential patients are given preventive care such that fewer of them need hospitalization will not only cut costs but also provide a better quality of life. Here, the incentive of the health care provider is aligned with that of the patient. The more hospitalizations that can be prevented, the better it is for everyone. 

AIG Decline Coverage For McLaren Driven In Malaysia

In an unusual move, motor insurer AIG has decided not to insure McLaren sports cars when they cross the Causeway. The move comes after a recent accident in Johor involving three McLarens as a group of British sports cars headed south towards Kluang on October 29, 2023. No one was injured in the incident.

In a correspondence with an insurance broker, AIG said its decision was due to “an exceptional increase in the frequency of serious accidents involving McLaren vehicles in Malaysia.” From April 1, 2024, the insurer said it will not be liable for losses arising from accidents that occur outside Singapore.

Motor Fraud Claim - India

Medical College police have registered a case against a five member gang for running a large-scale insurance fraud scheme in the city of Thiruvananthapuram, India. One of the people involved is incidentally a sub-inspector with the traffic division of city police. The gang allegedly created fake medical certificates after the accidents, and the fraud has been taking place in the city unabated for so many years.

The scandal came to light after insurance companies sought information under the Right to Information Act from Medical College Hospital to verify the authenticity of medical certificates submitted along with insurance claim applications. However, the replies said that no such persons underwent treatment at the hospital for accidents and the IP numbers in the medical certificates belong to some random people who were admitted at the hospital for various illnesses

Usually, the insurance companies do not verify the medical records and FIR but by filing an RTI query, a huge scam came to light. After one of the defrauded companies filed a complaint, Medical College police registered a case under sections of IPC 465 for forgery, 468 for forgery for the purpose of cheating, 471 for fraudulent use of a forged document and 34 for crime committed by more than one person, and have started an investigation. 

The fraud allegedly took place with three major insurance companies operating the city. Police said the traffic cop’s role in the crime cannot be simply considered as negligence as it took place several times in the last couple of years. 

“A mistake might happen once or twice but here it took place several times,” said police. According to police, one ‘fake accident’ created by the gang involves a motorcycle owned by fourth accused Manesh and allegedly took place on June 9, 2018. The vehicle ridden by Vishnu on which Sajith was riding pillion hit second accused Sandhya, according to the FIR registered by Sanal Kumar. 

Fake medical certificates of the treatment taken at the Medical College hospital were forged and sent to the court. Later, they were sent to the insurance company for claim processing. But when the company sought details of the treatment from the hospital, the fraud was revealed. 

“The investigation has just started and more details and the gravity of the fraud will come to light in the coming days,” police added. Police have not yet made any arrests in connection with the case

Agent Falsifying Customer's Signature

The Hong Kong Insurance Authority (IA) has imposed a suspension of 15 months on an ex-insurance agent for unethical practices. The action was taken after the agent was found to have been involved in witnessing a client's fraudulent signature and the creation of a counterfeit beneficiary change form.

Falsifying Signature - According to the IA, the issue stemmed from a life insurance application the agent managed for a client, intended to name the client's spouse as the insured individual. With the spouse unavailable to sign the necessary paperwork due to being outside of Hong Kong, the client unlawfully signed on his behalf. The agent compounded this violation by attesting to the forgery as a witness.

A subsequent failure by the agent to honor a request to designate the client as the beneficiary led to an attempt to cover this oversight by fabricating a beneficiary form after the spouse's death, and presenting it as if the client had filled it out.

Upon discovery, during a routine claim process initiated by the client after her husband's passing, the insurance company identified the falsifications, including discrepancies in the husband's travel records and the timing of the beneficiary form's submission. As a result, the insurance policy was nullified, leaving the client unprotected.

Agent Admits Fault - Throughout the ensuing inquiry, the agent acknowledged her actions, from endorsing the initial application fraud to her subsequent efforts to mislead the insurer. These actions brought into question her professional ethics and suitability for her role, prompting the IA to take corrective action.

The IA noted the agent's admission of wrongdoing and cooperation as factors in the swift resolution of this case, viewing them as steps toward her professional redemption.

In determining the punitive measures under the Insurance Ordinance (Cap. 41), the IA considered a range of factors. These included the annulment of the policy, the agent's facilitation of the fraudulent application, her personal gain from the misconduct, her admissions of the wrongdoing, and the necessity of deterring similar misconduct in the future.

Insurer Terminates Whistle Blower

A veteran insurance agent who was an agency leader within his company's network of agents is suing his former employer, Prudential Assurance Co Singapore, for wrongful termination.
See Jen Sen worked for Prudential for 19 years before his agency agreement was terminated in March 2022.

Whistle Blower Blown Away - Mr See alleges that the termination came about because he blew the whistle on Prudential's alleged malpractice in its business to the Monetary Authority of Singapore (MAS). Mr See is suing Prudential for wrongful termination, unjust enrichment and a claim under the Unfair Contract Terms Act.

Prudential applied to strike out Mr See's claims entirely and succeeded partially - an assistant registrar on the case struck out two of the claims, leaving the wrongful termination claim.

Mr See then appealed against the striking out and succeeded in a judgment made available on Thursday (Mar 21). This means he will be allowed to pursue all three claims against Prudential at trial.

Whistle Enquiry - According to the judgment, Mr See was the subject of an inquiry by a compliance committee set up by Prudential before his termination. He was suspected of sending complaints under various pen names to MAS and the chief executive officer of Prudential, accusing Prudential of malpractice.

This refers particularly to the launching of allegedly misleading advertisements of insurance products that contravened MAS guidelines.

Mr See did not deny that he was responsible for these complaints, but his counsel referred to them as the whistleblowing acts.Mr See alleged that there was a breach of contract when his agency agreement was wrongfully terminated.

The termination was in fact grounded in his whistleblowing acts, which is not a legitimate reason to terminate his contract, Mr See alleged. He also alleged that Prudential had been "unjustly enriched" by the financial benefits it retained from terminating his agreement.

This refers to bonus payments Mr See was entitled to under an incentive scheme called the "Agency Leader Long-Term Incentive Scheme" and bonus commissions under the "Sell-Out scheme".

The conditions for receiving these bonus payments and commissions are set out in documents circulated to the agents, and form the basis of Mr See's third claim - that some conditions breach the Unfair Contract Terms Act.

State Farm Decline To Renew Policy

The California homeowners’ insurance crisis reached another critical stage this week when State Farm General Insurance announced that it would not renew policies for 72,000 property owners across the state.

The insurance giant announced Wednesday that it would not renew homeowner insurance policies for 30,000 customers, including owners of condominiums. It also plans not to offer commercial apartment policies and won’t renew the 42,000 now in place.

Although the number of people affected is large, the company said the cuts represent less than 3% of its policies in the state. News of the cancellations did not sit well with the California Department of Insurance.

State Farm’s decision not to renew policies comes as thousands of Californians are finding it extremely difficult to insure their homes and commercial properties as companies increase rates, limit coverage or stop offering policies in areas increasingly susceptible to natural disasters.

The companies have cited high inflation, catastrophe exposure, reinsurance costs and the limitation of decades-old insurance regulations as reasons for scaling back policies in the state.

State Farm reported a net loss of $6.3 billion in 2023 compared to a net loss of $6.7 billion in 2022.

Malaysia Takaful Insurance & Funds 2H2023

The profitability of insurance and takaful funds declined in the second half of 2023 (2H2023) due to larger net underwriting losses of life insurance and family takaful funds as a result of an increase in medical claims payments.

Income Declined - Life insurance and family takaful funds’ excess income over outgo declined 48.3% to RM3.1 billion in 2H2023, compared with RM6 billion in 1H2023, according to the central bank’s Financial Stability Review for 2H2023.

Underwriting income of life insurance and family takaful funds continued to be weighed down by higher medical benefit payouts to RM5.3 billion in 2H2023, versus RM4.7 billion in 1H2023, due to higher average cost and incidence rates for medical treatment compared to the pre-pandemic period.

While insurers and takaful operators have commenced repricing exercises, the effect of these changes on underwriting margins will take time to materialise, as price adjustments are applied only at policy anniversaries.

Underwriting income - was also weighed down by the longer-term decline of participating insurance businesses, where payouts related to participating insurance policies have surpassed net premium income. This reflects the continued shift in new business premiums from participating insurance policies to investment-linked policies over time.

The share of net premiums for participating businesses has correspondingly declined sharply to 16% of total net premium income, from 17% in 2H2022. As a comparison, the half-yearly average from 2015 to 2019 was relatively higher at 35%.

Premium Growth - Meanwhile, new business premiums improved by 6.8% in 2H2023 compared to 2H2022, mainly supported by the investment-linked and non-participating segments. The growth in these segments was mainly driven by higher sales through the bancassurance channel and the continued roll-out of new insurance and takaful products launched during the period, the central bank said.

General insurance & Takaful Funds - operating profits rose to RM1.9 billion in 2H2023 from RM1.3 billion in 1H2023, thanks to higher net underwriting profit.

The higher net underwriting profit was driven by higher premium growth in the motor segment, corresponding to the higher car sales due to promotional campaigns and new model launches, including electric vehicles during the period. The higher underwriting profits were also supported by the absence of large claims from flood and fire events during the period, compared to 1H2023.

Capital Buffers - Overall, the industry aggregate capital adequacy ratio remained healthy at 222.2% and above the regulatory minimum of 130%, albeit lower than 226.4% in June 2023.  This is in excess of regulatory requirements remained sound at RM38.6 billion, as compared to RM38.9 billion in June 2023.

Looking ahead to 2024, volatile financial market conditions will remain a key downside risk to the insurance and takaful operators, given their sizable bond and equity investments.

Sustained cost pressures stemming from inflation in motor and medical claims are also likely to persist, amid a more gradual pace of premium rate adjustments to preserve insurance affordability.

UK Insurer Unwilling To Insure Chinese EV

The UK car insurance industry is facing “challenges” in covering Chinese electric vehicles amid influx of the models into Europe. A dearth in replacement parts, poor cooperation between insurance firms and Chinese manufacturers and a lack of technical knowledge of the new vehicles, has bumped up the cost and time of repairs.

This has meant insurers are being forced to pass on extra costs to British drivers in the form of higher premiums if they opt for Chinese EVs. The primary issue is how difficult the cars are to repair in a timely manner, should anything go wrong. 

Replacement Parts - Whilst the quality of the cars themselves is excellent, the failure of manufacturers to provide a steady stream of replacement parts is effectively pricing out a huge portion of British motorists from owning a Chinese EV.

Even “standard repairs” for some Chinese models were “becoming impossible due to the scarcity of parts. The warnings come as Chinese electric cars flood into the European market, threatening European EV makers with cut throat prices and prompting the European Commission to moot imposing punitive new tariffs on imports.

Automakers such as Shenzhen-based BYD and GWM Ora have accelerated sales rapidly in Europe over the last year. In a report this month, UK drivers of the two manufacturer’s models were facing especially steep quotes for cover, due to the limited number of insurers willing to underwrite them. Premiums would be “sky-high… if insurers are willing to cover them at all.

£5bn Investment Scam

Within weeks of Yadi Zhang's arrival in London in September 2017, Jian Wen had left her job and room in a Chinese takeaway and moved into a £5m six-bedroom house near Hampstead Heath.

The woman - who claimed to run an international jewellery business trading in diamonds and antiques in countries including Japan, Thailand and China, travelled the world and spent tens of thousands of pounds on designer clothes and shoes in Harrods.

New Affluent Lifestyle - In her newly affluent lifestyle, Wen bought a £25,000 E-Class Mercedes and sent her son to the £6,000-a-term Heathside preparatory school. But alarm bells rang when she tried to buy some of London's most expensive properties, including a £23.5m seven-bedroom Hampstead mansion with a swimming pool and a nearby £12.5m home with a cinema and gym.

Wen, who had declared income of just £5,979 in the 2016/17 financial year, could not explain the source of the Bitcoin she would use to pay for the properties and police first raided the women's home on 31 October 2018.

But it would be another two-and-a-half years before investigators realised they had made the UK's biggest-ever cryptocurrency seizure when more than 61,000 Bitcoin were discovered in digital wallets. The cryptocurrency was worth £1.4bn at the time but its value has now risen to more than £3bn, while 23,308 Bitcoin, now worth more than £1bn, linked to the investigation remains in circulation.

The £5bn Investment Fraud - The Bitcoin came from a £5bn investment scam carried out in China by Zhang, 45, who arrived in the UK on a false St Kitts and Nevis passport after conning nearly 130,000 Chinese investors in fraudulent wealth schemes between 2014 and 2017.

Wen was not alleged to have been involved in the underlying fraud. Zhang, who is also known as Zhimin Qian (which means money in Chinese) has fled the UK and her whereabouts are unknown.

Wen, 42, has been found guilty of one count of money laundering between October 2017 and January 2022 and the jury failed to reach verdicts on two similar counts following a trial at Southwark Crown Court. Prosecutors are not seeking a retrial and Wen will be sentenced on 10 May.

She was acquitted of 10 other money laundering charges at a trial last year, which could not be reported over fears hackers could target the firm holding the seized cryptocurrency if the figures involved were made public.

Who Is MacKenzie Scott

Billionaire philanthropist and author MacKenzie Scott announced Tuesday she is giving $640 million to 361 small nonprofits that responded to an open call for applications.

Yield Giving’s first round of donations is more than double what Scott had initially pledged to give away through the application process. Since she began giving away billions in 2019, Scott and her team have researched and selected organizations without an application process and provided them with large, unrestricted gifts.

In a brief note on her website, Scott wrote she was grateful to Lever for Change, the organization that managed the open call, and the evaluators for “their roles in creating this pathway to support for people working to improve access to foundational resources in their communities. They are vital agents of change.”

Some 6,353 nonprofits applied to the $1 million grants when applications opened. The 279 nonprofits that received top scores from an external review panel were awarded $2 million, while 82 organizations in a second tier received $1 million each.

Scott has given away $16.5 billion from the fortune she came upon. Initially, she publicized the gifts in online blog posts, sometimes naming the organizations and sometimes not. She launched a database of her giving in December 2022, under the name Yield Giving.

In an essay reflecting on the website, she wrote, “Information from other people – other givers, my team, the nonprofit teams I’ve been giving to – has been enormously helpful to me. If more information about these gifts can be helpful to anyone, I want to share it.”

US$20 Billion Scam In Vietnam

Vietnamese prosecutors called on Tuesday for the death penalty to be handed to Truong My Lan, the mastermind of the Southeast Asian nation's largest financial fraud on record.

Lan, the chairwoman of real estate developer Van Thinh Phat Holdings Group, faces a trial in the economic hub of Ho Chi Minh City on accusations of leading a scam that caused damages of US$20 billion, or about 4.9 per cent of Vietnam's gross domestic product.

The trial, expected to run until the end of April, is part of a campaign against graft that the leader of the ruling Communist Party, Nguyen Phu Trong, has pledged for years to stamp out, although with few tangible results.

Multiple Scams - Lan and her accomplices are accused of siphoning off more than 304 trillion dong (US$12.46 billion) from Saigon Joint Stock Commercial Bank (SCB), which she effectively controlled through dozens of proxies.

Prosecutors have also accused the group of causing damages to the to the tune of a further 193 trillion dong, more than 129 trillion dong of which consists of accumulated interest on the loans they took. That carried total financial damages in the case to 498 trillion dong (US$20 billion).

From early 2018 through October 2022, when the state bailed out SCB after a run on its deposits, Lan appropriated large sums by arranging unlawful loans to shell companies.

She is accused of bribing officials to ignore her activities, including paying an alleged US$5.2 million to a senior central bank inspector. Three independent auditing firms had committed violations in the SCB case.

Evergrande Collapsed

Struggling Chinese property giant Evergrande and its founder, Hui Ka Yan, have been accused of inflating revenues by $78bn (£61.6bn) in the two years before the firm defaulted on its debt. 

US$583 Million Fine - The country's financial markets regulator has fined the company's mainland business Hengda Real Estate $583.5m. Hui also faces being banned for life from China's financial markets. Hui was also fined $6.5m to the Shenzhen and Shanghai stock exchanges.

In January, Evergrande was ordered to liquidate by a Hong Kong court. The China Securities Regulatory Commission (CSRC) laid much of the blame on Hui, who was once China's richest man, for allegedly instructing staff to "falsely inflate" Hengda's annual results in 2019 and 2020.

Investigation on Illegal Crimes - Last September, Mr Hui who is also the company's chairman was put under police surveillance as he was investigated over suspected "illegal crimes". The announcement comes days after the CSRC vowed to crack down on securities fraud, and protect small investors with "teeth and horns".

Evergrande has been the poster child of China's real estate crisis with more than $300bn of debt. Liquidators have been appointed to look at Evergrande's overall financial position and identify potential restructuring strategies. That could include seizing and selling off assets, so that the proceeds can be used to repay outstanding debts.

However, the Chinese government may be reluctant to see work halt on property developments in China, where many would-be homeowners are waiting for homes they have already paid for.

Problems In China's Property Market - are having a major impact as the sector accounts for around a third of the world's second largest economy. The industry has been facing a major financial squeeze since 2021, when authorities introduced measures to curb the amount big real estate developers could borrow.

Since then several large property firms have defaulted on their debts. On Monday, official data showed that property investment in China fell 9% in January and February from a year ago.

New construction starts also dropped by 30% which was their their worst fall in more than a year.

Insurer Refused Coverage For Hero

A man who sacrificed his car to stop a hit-and-run driver in central France has been able to buy a new vehicle after hundreds of strangers came together to fund a replacement. 

Motor Insurer Denied Claim - Yaya Sow, a painter and plasterer, prevented a hit-and-run driver from fleeing the scene of a fatal accident on August 23, 2023, by using his car as a shield. That vehicle was a write-off, but his insurance company refused to cover him for the incident, judging that his choice to intercept the hit-and-run driver was deliberate. As a result, he had been without a vehicle since the accident. 

Crowdfund - Now, Mr Sow, who is based in Limoges (Haute-Vienne, Nouvelle-Aquitaine), has been able to buy himself a small van to replace the vehicle he sacrificed after a total of 723 people donated to an online crowdfund set up in his honor.

Cathy Meunier, also from Limoges, set up the crowdfund for the ‘hero of Limoges’ after hearing Mr Sow’s story, and the negative response from his insurance company. She works with elderly people, and was particularly moved by the incident, after hearing that the would-be hit-and-run driver had hit and killed a person in their 70s. The would-be hit-and-run driver was captured and later sentenced to three years in prison for the killing.

The fund-raising campaign enabled us to collect a nice sum, €13,000 from 723 donors, Mr Sow has also changed his vehicle insurance company.

Selling Life Insurance Face-to-Face

Massachusetts Mutual Life Insurance Co. said it will "wind down" its online Haven Life subsidiary, which offers term life insurance only. MassMutual will shift direct access to MassMutual life insurance products from Haven Life to MassMutual. 

Eyeballs To Eyeballs - MassMutual’s focus is on meeting people where they are with the financial solutions they need, including providing access to our products both directly and through our network of affiliated financial professionals and strategic partners.This will allow us to focus our efforts and resources on initiatives that deliver on our strategy and provide the most value to our policyowners.”

Haven Life - Created in 2015, Haven Life suffered from "lack of consumer adoption" and "high costs associated with customer acquisition". Haven Life focuses on direct-to-consumer term life policies written digitally without health exams.

Haven Life was founded by Yaron Ben-Zvi, who told a story of a poor life insurance shopping experience he and his wife had. Ben-Zvi, who led Haven until October, 2022, described Haven as a place customers can go "and in 20 minutes see how much they need, apply for a policy online, get a decision and start coverage right away.

China Insurance Challenges

Eight years have passed since China initiated an extensive campaign to curb the aggressive tactics employed by its insurance sector, yet the battle to reign in cowboy behavior remains unfinished. Estimates suggest that problematic assets amount to one trillion yuan (over $140 billion), highlighting the ongoing struggle against financial instability.

Business Connections - This government initiative primarily targeted insurers linked with private conglomerates, which used their extensive finance sector connections to embark on high-risk growth strategies. These campaigns have seen the collapse of industry behemoths such as Anbang Insurance Group Co. Ltd.(which made worldwide headlines when it paid $1.95 billion for New York’s Waldorf Astoria) and Tomorrow Holding Co. Ltd.

Significant China GDP - The insurance sector, which accounts for over 23% of China’s GDP and stands as the second-largest globally, had amassed total assets of 29.6 trillion yuan by September 2023, as per the National Administration of Financial Regulation (NAFR). One significant development in the sector’s attempt to stabilize was the acquisition of bankrupt Tomorrow Holding’s E An Property & Casualty Insurance Co. Ltd. by electric vehicle powerhouse BYD Co. in May 2023 for $1 million. This move marked the conclusion of a three-year bankruptcy reorganization, representing the nation’s inaugural successful rehabilitation of a bankrupt insurer.

E An’s financial woes, primarily stemming from embezzlement by major shareholders, symbolize the broader challenges faced by the industry. Despite efforts to salvage companies like E An, the insurance landscape continues to deteriorate, exacerbated by the pandemic’s lingering effects, poor investment outcomes, and low-interest rates. These factors have raised alarms over insurers’ abilities to honour maturing policies.

NAFR data reveals that the risk-laden insurance assets have ballooned beyond 600 billion yuan ($83.4 billion), with some estimates reaching 1 trillion yuan. The total assets of China’s insurance sector were recorded at 29.96 trillion yuan by the end of 2023, with a mere 2.73 trillion yuan in net assets, indicating a high debt ratio. A troubling rise in the number of insurance companies rated as high-risk underscores the severity of the situation, with those failing to meet solvency ratios climbing significantly.

China has roughly 200 licensed insurance companies, and the number of those rated C or D more than quadrupled from the six there were in the third quarter of 2020, to 27 in the first quarter of last year.

China’s crackdown on financial risk, initiated in 2017, targeted the insurance industry’s reckless elements, leading to regulatory actions against risky products and corrupt practices. The current strategies for addressing the risks involve leveraging both industry and external resources, as well as postponing risk resolution to allow for strategic flexibility. However, these measures have been met with skepticism amid changing market conditions and regulatory delays, which have led to asset devaluation and increased financial losses within the sector.

Status of Life Insurer - In 2022, the profit of China’s 86 life insurance companies dropped by 57.3% to 57.2 billion yuan ($8.5 billion). Only 38 of these companies were profitable, a decrease from 59 profitable companies the previous year. A total of 71 life insurance companies performed worse than the year before.

The top 10 loss-making life insurers accounted for a combined loss of 109.7 billion yuan.
Despite the decline in life insurance company profits, the overall insurance industry in China saw a 4.6% increase in premium income to 4.7 trillion yuan in 2022.

This increase in premium income comes after a 0.8% decline in 2021, and follows growth rates of 6.1% in 2020 and 12.2% in 2019. The average investment return for the insurance industry in 2022, excluding unrealized gains and losses, was 3.76%.

In the first half of the following year, life insurers were instructed to lower the assumed rates of return on new products to below 3.5% for traditional products, 2.5% for participating policies, and 2% for universal life products to relieve balance sheet pressure.

Adverse Investment Return - The insurance industry’s premium income saw a growth of 9.13% in 2023, yet the industry is grappling with investment return rates hitting their lowest since 2006. The economic downturn and weakening performance of insurers signal tougher challenges ahead in risk mitigation efforts. Insights from industry experts have highlighted the need for precise actions to address the integrity of major shareholders and improve management professionalism.

As part of its risk management strategy, China has focused on stabilizing smaller financial institutions and improving regulatory frameworks. The process involves transferring viable assets to new entities to attract investment while managing troubled assets separately. The role of industry leaders and government-backed investors has been pivotal, with significant funds allocated to support high-risk insurance firms.

The case of E An, which emerged from financial turmoil following its acquisition by BYD, illustrates the potential for recovery through judicial and market-oriented measures. However, addressing the larger financial voids left by entities like Tomorrow Holding and Anbang will require continued effort from authorities along with substantial capital injections. The challenge of balancing risk mitigation with financial stability remains daunting, necessitating a careful approach to management and regulatory oversight to prevent further industry destabilization.

Reason To Increase Health Insurance Premium

The operational and ethical frameworks governing the medical practice are set to experience a ripple effect following a recent landmark ruling on healthcare accountability. The Association of Private Hospitals Malaysia comes after the Federal Court decided to hold Columbia Asia Sdn Bhd and an anaesthetist jointly responsible for the tragic medical outcome of a patient.

RM4 Million Compensation - This landmark decision compels the hospital and its staff to compensate the Patient nearly RM4 million for negligence that led to severe brain damage.
The ruling was anticipated to have ripple effects across the Malaysian medical community, potentially influencing practitioners to adopt a more cautious approach to clinical procedures.

Insurance Premium - Such practices might mitigate legal risks, they carry the unintended potential to inflate healthcare costs, making treatments less about efficacy and more about legal safety nets. In particular - looming spectre of increased insurance premiums for medical facilities, present a sobering challenge to maintaining the affordability and accessibility of healthcare.

Beyond the possibility of increased defensive medicine, both hospitals and doctors are likely required to increase their medical indemnity insurance, and the patients will ultimately need to bear this cost.

Insurer Rejected Claim Due To Negligence

A Malaysian Court has ruled that a tractor owner could not claim for theft of the vehicle under his insurance policy because he had negligently left the tractor unattended by the roadside. In rejecting a suit filed by businessman, against RHB Insurance Berhad, the Magistrate ruled that the insurance policy stipulated that theft due to negligence of the vehicle owner was not covered.

Insured demanded RM85,000 from the insurance company after his tractor was stolen when it was left unattended for two days on the shoulder of the road in Taman Pertanian Jubli Perak Sultan Haji Ahmad Shah because it had broken down.

The Court ruled that the plaintiff's action of leaving the vehicle unattended for two days amounted to negligence on his part. The insured's action was interpreted as inviting danger as it could lead to the theft of the vehicle, and the plaintiff's action of leaving the tractor unattended caused the vehicle to be stolen and could not be traced by police investigators.

The court also agrees with the defendant that the plaintiff carelessly left the vehicle unattended for any reason whatsoever because the plaintiff should be bound by all the terms and conditions contained in the insurance policy he purchased.

In this connection, the court finds that the plaintiff failed to prove his claim against the defendant, hence the plaintiff's claim is dismissed with costs of RM1,500 to be paid to the defendant.

Plaintiff had purchased insurance coverage for the vehicle from the defendant for road accidents and theft for the period from Jan 5, 2021 to Jan 4, 2022. On Nov 24, 2021, Plaintiff  parked the vehicle on the roadside due to damage, and he realized his vehicle was stolen after going to the location on Nov 26. Following that, a police report was lodged on the same day.

The plaintiff then filed a claim for loss of the vehicle due to theft, but the defendant rejected the claim because it lacked strong or reasonable grounds.

Insurance Fraud - Multiple Policies

A man has been charged with insurance fraud after trying to claim over £1million for a double amputation caused by alleged self-inflicted frostbite. Investigators accused the man, identified only by his surname Chang, of deliberately immersing his legs in a bucket filled with dry ice for 10 hours in order to claim money from insurers when his limbs were amputated for frostbite last February.

Multiple Policies -The 24-year-old suspect claimed he suffered the injuries after riding his scooter on a cold evening in northern Taiwan, suffering blistering injuries as a result. But Taiwan's Criminal Investigation Bureau (CIB) said investigators were alerted when insurers flagged suspicious claims, and found he had taken out several high-payout packages just days before the alleged scooter trip.

The CIB noted in their report that 'Taiwan is a subtropical region' and there are, as a result, 'no known cases of serious frostbite requiring amputation due to natural climate factors in the flatlands'.

Legs Amputated - Chang, a student, underwent emergency surgery in February last year and both legs were amputated below the knee due to fourth-degree frostbite, sepsis and bone necrosis.

Prosecutors said Chang then spent around 10 hours with his legs immersed in the dry ice. Chang was allegedly helped by an accomplice named as Liao, 24. Liao allegedly helped Chang to fill a plastic bucket with dry ice before strapping him into a chair with cable ties.

Liao documented the stunt between 2am and noon on 27 January 2023, according to the prosecutor's statement on March 14. Direct contact with dry ice, a solid form of carbon dioxide with a surface temperature of -78.5C, can quickly damage skin cells and lead to frostbite.

The two suspects successfully were able to claim the equivalent of £5,489 (USD 7,000) from one insurance firm a month after Chang lost his lower legs. Four other companies refused to pay out the rest of his eight disability claims. All five firms reported his suspicious insurance claims to the authorities. In total, the claims reportedly totaled around £1million (USD 1.3 million). Chang and Liao, who went to high school together, have been charged with insurance fraud and attempted insurance fraud as the case continues.

Reporting on their investigation, the CIB presented weather reports that showed the temperatures on the day in question were between 6.1C and 17C, too mild to cause serious frostbite. The agency said Chang's injuries showed he wasn't wearing shoes or socks at the time of his injuries, concluding that they were therefore 'man-made'.

Following a raid on his home in November last year, the police found the bucket he allegedly used along with a polystyrene box that held the dry ice.

Hertz U-turn on Electric Vehicles

Hertz Global Holdings is replacing its chief executive officer in the wake of a disastrous bet on electric vehicles that the company began unwinding in recent months.

Stephen Scherr - who ran Hertz for just over two years after three decades at Goldman Sachs Group has decided to step down. Scherr, 59, joined Hertz several months after it emerged from bankruptcy and started making splashy wagers on electric vehicles. Under new owners Knighthead Capital Management and Certares Management, the rental company announced plans to order 100,000 vehicles from Tesla, sending the automaker’s market capitalization soaring past the $1 trillion mark at the time. Hertz doubled down on EVs in the months after Scherr took over, placing big orders with Polestar and GM. The company ended up buying a small number of cars from the two companies.

Strategy Backfire - Those bets went awry last year, when Tesla slashed prices across its lineup to keep growing vehicle sales. This hammered the resale value of used Model 3 sedans and Model Y crossovers just after Hertz had added ten of thousands of those vehicles to its fleet.

By December, Hertz started selling off 20,000 electric vehicles, or about a third of its EV fleet. Germany’s Sixt SE, a leading car-renter in Europe — is taking even more drastic measures, phasing Teslas out of its fleet entirely.

Hertz announced its EV sell-down plans in January, citing lackluster demand, costly depreciation and expensive repairs. The Estero, Florida-based company took a $245 million charge and reported its biggest quarterly loss since the pandemic. 

Shares of Hertz fell 2% after regular trading in New York Friday.

Insurer Rejected Claim Under Accident Policy

A widow who sought accidental death benefits from the company that insured her late husband was awarded more time by the court to press her claim. 

Insurance Claim Rejected - Mr Teng Boon Thye, 58, had died after riding his bicycle into a drain in 2021. However, Chubb Insurance Singapore disputed the claims of about S$406,000 (US$305,000) from the two policies her late husband was insured under.

Madam Lee Hui Chin, 60, submitted claims to the insurer, but the company obtained a report listing causes of death that it used to reject the claims, saying the man had died from sickness, which was not covered under the policies.

Mdm Lee's daughter, Ms Rachel Teng, consulted lawyers and later filed notices of arbitration with the Singapore International Arbitration Centre (SIAC) over the two polices. But the insurer made further objections including that Ms Teng was not the policy holder and could not commence arbitration proceedings. Mdm Lee, who holds the policies for her husband, applied to the High Court under the Arbitration Act to extend the time fixed to refer disputes to arbitration.

Death Cause By Natural or Accident Causes - Mr Teng fell while riding his bicycle on Apr 2, 2021 and was found unconscious in an uncovered drain. He was taken to Ng Teng Fong General Hospital and did not regain consciousness. He was removed from life support a week later and died.

According to his daughter, 25-year-old Ms Teng, the treating doctors at the hospital had said Mr Teng died as a consequence of the injuries sustained in the accident. An MRI scan on Apr 4, 2021 showed a spinal cord injury and the MRI report also referenced changes in Mr Teng's lungs, chest fractures and cardiac arrest.

In a death certificate issued on Apr 10, 2021, the forensic pathologist certified the cause of death as "coronary artery disease with pneumonia". The State Coroner also issued a certificate stating that it was unnecessary to hold an inquiry as the cause of death was due to natural causes. No autopsy was performed as a result.

Chubb Insurance Singapore - Mdm Lee held two insurance polices with Chubb Insurance Singapore insuring her husband. The policies provided for accidental death benefits, payable in the event that death occurs as a result of an accidental injury, Justice Chua said in his grounds of decision.

The policies also provided that any dispute must be referred to arbitration, and that this must be commenced three months from the day parties were unable to settle the dispute. On Apr 20, 2021, Mdm Lee submitted claims to Chubb Insurance Singapore under the two policies.

The insurer obtained a report from Ng Teng Fong General Hospital in which the attending physician stated that the primary cause of death was likely cervical spine injury leading to cardiac arrest.

The report also stated that while the coroner had reported coronary artery disease with pneumonia, there was no evidence of acute myocardial infarct - the medical term for a heart attack - on initial presentation.

Chubb Rejected Claim - On Aug 19, 2021, the insurer rejected Mdm Lee's claims on the ground that the cause of Mr Teng's death was due to sickness - coronary artery disease with pneumonia. This was not covered under the policies.

Ms Teng consulted lawyers and obtained a further medical report from a neurologist, who stated among other things that there was no evidence Mr Teng had died of coronary artery disease. The neurologist noted that no autopsy had been performed.

Arbitration - were granted to Ms Teng to be the administrator of her father's estate in July 2022. On Aug 26, 2022, lawyers for Mr Teng's estate wrote to the insurer enclosing a copy of the neurologist's report.

The insurance company took time to review the claims and agreed to extend the time bar for commencement of arbitration until end-June 2023. However, Chubb Insurance Singapore confirmed its previous position on Dec 30, 2022 that the claims were not covered by the two policies.

Ms Teng then filed two notices of arbitration with SIAC in February 2023. In the insurance company's responses, it noted that Ms Teng could not commence arbitration proceedings against it as she was not the policy holder. The insurer asked for a dismissal of the proceedings, and the arbitrator allowed it.

Mdm Lee then filed an application to the High Court in September 2023 asking for time to be extended for her to commence arbitration against Chubb Insurance Singapore.

Justice Chua granted her application, saying this was not a case where she had "sat idly by".

"Arbitration was commenced well before the expiry of the extended time bar of Jun 30, 2023," he said. "The problem was that the arbitration notices were issued in Ms Teng's name instead of (Mdm Lee's)."

He noted also that Mdm Lee had acted quickly in filing the application. The amount involved was also significant, with the value of the claims under the policies amounting to S$406,000.

Great Eastern Agent - 30 Months Jail Term

To gamble online on unlicensed gambling websites and cover his personal expenses, an insurance agent cheated his friend’s family of S$309,820 (RM1.09 million). Tan Wei Chong, 36, pocketed the money they had paid for both genuine policies offered by insurance agency Great Eastern and fictitious policies that he had invented.

Tan never made restitution to the victims, though Great Eastern fully reimbursed them for their losses some time later on Aug 27, 2021. Today, Tan was sentenced to 30 months’ jail, backdated to June 12 last year when he was put in remand

Tan was a financial consultant for Great Eastern when his friend, Mr Cher Chee Wee, introduced his family to Tan. The pair had known each other since secondary school. Mr Cher and his father, mother and sister purchased more than one insurance policy each from Tan. Court documents did not state the ages of Mr Cher and his father.

On Sept 22 in 2017, Tan met Mr Cher’s mother, Liu Swee Khim, now 71, and recommended that she get a Great Eastern insurance policy. Liu trusted Tan since he was her son’s friend, and decided to invest S$100,000 in the policy through Tan. Liu then asked her daughter, Ms Jeslyn Cher, now 38, to give a cheque of S$100,000 to Tan, which she did.

When the cheque bounced, Tan asked Ms Cher to reissue another cheque. This time, he told her to leave the payee name unwritten and he would help her to fill it in. However, instead of addressing the cheque to Great Eastern, Tan wrote the name of a company for which his father is a director. He would then transfer the money in smaller transactions from the company bank account to his own bank account.

On Oct 16 in 2019, Tan called up Liu to sell her another insurance policy — this time, the policy was fictitious. He told her that there was an ongoing promotion for this policy and she decided to invest S$120,000. Liu again asked Ms Cher to issue a cheque with the payee name column left blank, and Tan deposited the cheque into his father’s company bank account.

The next day, Tan called Liu to tell her that he could not meet his sales target for the month. He asked if she could invest an extra S$30,000 into the fake policy and Liu complied. Tan was given a S$30,000 cheque by Ms Cher, which he deposited into his father’s company account on Oct 22, 2019.

Tan repeated the ruse again sometime around March 12 in 2020, where he told Liu that he could not hit his sales target and asked her to buy a S$20,000 policy. She agreed but transferred the money directly to Tan’s personal bank account this time.

In total, Tan received S$309,820 from Liu and Ms Cher. He used the money to feed his gambling addiction and to cover his personal expenses. When the fictitious policy was due to mature on Sept 9 in 2020, Liu called Tan because she had not received any payout or notification from Great Eastern.

To stave off further questions, Tan forged a letter from Great Eastern in October 2020 stating that there “were unintentional errors in the payment process that resulted in a delay in the payment” and sent the letter to her home.

Leadership Applying Lateral Thinking

Creativity has always been a highly sought after skill both on the personal and professional side of life. In the business world, it means thinking up exciting ideas to tackle complex and ever-changing situations. It’s the foundation of lateral thinking.

The most innovative companies in the world stand out for their commitment to lateral thinking. Breaking the mold of what’s normal or expected means the possibilities are endless and the benefits can show in ways you least expect.

There are 5 steps to help you best utilize lateral thinking in your company. This guide will help you get the most out of your teams’ skills and push the whole company forward.

Open Your Mind - Seek new ideas, get out of our comfort zone, and change our perspectives. This allows us to put aside any preexisting stereotypes or traditional concepts in our collective imagination. Through this process, we can change our perceptions to develop new ideas that may have been glossed over or ignored with vertical or logical thinking.

Opening our minds allows us to unleash a multitude of possibilities and create a new framework that incorporates the new ideas put forward. The imagination is both endless and collective in the workplace, and all members work together to understand, analyze, and accept new creative limits.

A practical example of expanding the limits of the mind is to ask yourself “why?” repeatedly until you get a better picture of the alternatives and underlying intentions of any particular action. By posing this question several times to an action or situation, we can find creative and productive misgivings that may lead us to rethink the norms we’ve become accustomed to, even on the granular level.

Promote Creativity - After broadening mental horizons in the office, it’s important to nurture the flow of creative ideas. Creativity and simplification complement each other enormously. We must find new, alternative ways of doing things. However, not just any idea, just for being simple and different, will be effective. Good ideas need to add value and promote successful business proposals.

Visual responses can be a good creative stimuli. For example, a photograph allows us to practice creative interpretation. However, we don’t just interpret our acquired knowledge, we also combine it, reapply it to other contexts, and even develop alternatives to what we previously knew.

A photo of a product can produce a wide array of emotions and ideas –from the obvious to the abstract:

 - A description of how things are represented.
 - An explanation of what we see in the image.
 - A projection of what the product will look like in the future.
- Imaginative alternatives as diverse as the user’s imagination allows.

Get Ahead Of The Problem - Human beings in general often have a tendency to be reactive, not proactive creatures, waiting for a situation to worsen before deciding to act. Yet, lateral thinking promotes proactivity and boldness to suggest and commit to ideas without fear of failing. The truth is that not all ideas are going to be a hit, but that shouldn’t hinder creativity. The idea is to create an environment that nurtures innovation, in whatever form it takes, and go from there.

There can be multiple solutions to any one problem. For example, most problems require a solution that falls into one or more of these general categories:

 - Overcome whatever obstacle you’re facing.
 - Plan better or create something new altogether.
 - Find and get rid of a specific problem point.

Any combination of these three general approaches to problems can be applied in the early stages of developing a value proposition or any other such project. In doing so, not only do we give ourselves the possibility to consider other alternatives, but we can also forecast possible changes or complications that may arise.

In some proposals, these three general solutions may still be unsatisfactory, in which case they should be expanded and further hashed out. Nonetheless, this process helps us take a step back and analyze what we have in front of us. It generates conversation and feedback without having to wait for a problem to get out of hand first.

Put It Up To Chance - Once we’ve stepped out of our comfort zone, and our creativity is flowing, it’s important to let chance step in. Sometimes things that are out of our control affect us more than we’d like to admit. Stimulating lateral thinking, and taking seemingly unrelated elements into consideration, allows us to play two random concepts off each other and open up new ways of thinking.

An interesting exercise for this is to choose a random word (from a dictionary, for example) and see how that word would affect the idea at hand. It’s a good way to see how unforeseen circumstances will affect the fate of an idea. You can overcome the limitations of logical thinking by throwing a wrench into the plan and seeing how it stands up to it. This rethinking prevents traditional thinking and parameters from limiting your scope, no matter how unlikely such situations may be.

Apply Logic In Reverse - Vertical thinking is the sworn enemy of lateral thinking. The former limits itself to “common sense” and other traditional frameworks we’re used to. Lateral thinking, however, allows us to consider a wider range of possibilities and solutions that may not have been looked at before. It allows us to think up abstract and backward scenarios that don’t follow traditional logic and dream up solutions never thought of before.

For example, a door company might consider multiple possibilities moving forward:

 - Doors that aren’t rectangular.
 - Reverse hinges.
 - Opening with facial recognition.
 - Complete uniformity of designs.

Some assumptions may seem simple or obvious but that doesn’t matter. Let the ideas flow freely, and the assumptions be turned on their head.In short, this guide serves as a basis for applying lateral thinking in business, which will turn your office into a more open, innovative, and conscious place.

Getting out of your comfort zone and embracing new value propositions is the key to company survival in a business environment where the only constant is change. Make the shift towards lateral thinking in your company and the results will surprise you.

HSBC Issued $250 Million Life Insurance Policy

Issued and fully underwritten by HSBC Life, the firm’s insurance arm based in Hong Kong, this monumental policy underscores HSBC’s prowess in the insurance sector and its ability to cater to the evolving needs of affluent individuals.

Structured as a whole-of-life protection plan, the policy promises to pay out a substantial $250 million to the named beneficiary of the insured individual upon their demise. With features meticulously crafted to safeguard the insured’s wealth for future generations, this policy stands as a testament to HSBC’s commitment to providing comprehensive and tailored insurance solutions.

In the past year alone, HSBC Life has issued an impressive ten life insurance policies valued at $50m or higher to individual clients, reflecting the company’s strong foothold in the high-value insurance market.

In 2014, the previous Guinness World Record was set for a life insurance policy valued at $201m, certified in California, United States.

Malaysian - Inadequate Savings

A significant number of Malaysians do not have enough savings for their retirement, with only 33% of active Employee Provident Fund (EPF) members having recorded basic savings of RM240,000 as of last year. This percentage represented 2.4 million members aged between 18 and 55 in the formal sector.

However, this was an improvement from the 31% in 2021 and 30% in 2022 – which were due to withdrawal facilities for EPF members during Covid-19 lockdowns – but still a plunge from 37% in 2020.

As at December last year, there were 16.07 million EPF members. 8.52 million were active members, representing 50% of Malaysia’s 17.03-million-strong labor force.

Target Amount At Age 55 - Basic savings is a pre-determined amount set according to age in Account 1 under EPF to enable members to achieve a minimum savings of RM240,000 by the age of 55. Current data showed that the number of people aged between 41 and 50 who had achieved their basic savings was higher than those aged between 51 and 55, who are closer to retirement age. 

All this data is telling me that a large portion of the population has inadequate savings for retirement. 75% of members who had retired and taken out their savings in a lump sum ran out of money within five years.

Beyond Formal Employment - Rapid transformation of the working landscape, with more people shifting beyond formal employment, as one of the challenges, referring to a rise in gig workers and self-employment due to the Covid-19 pandemic.

Malaysia anticipates an increase in different types of jobs going beyond formal employment, including gig jobs, remote working, and independent contractors. While this group of people would generate relatively higher income, they would not have old-age protection as they are not covered by any social security.

Research showing that by 2040, 33% of employment in Malaysia was projected to be in the informal category. This would lead to lower likelihood of old-age income security and financial resilience upon retirement while at the same time, lowering the active formal membership base at EPF.