AXA-Affin Mulling Exit From Malaysia

Singapore’s Great Eastern Holdings Ltd. and Assicurazioni Generali SpA are among potential bidders for the life and general insurance businesses in Malaysia that AXA SA and Affin Bank Bhd.

Great Eastern, which is majority-owned by Oversea-Chinese Banking Corp, and Italy’s Generali are working with their respective advisers on potential offers.

The first round of bidding is expected to conclude by the end of next month, the people said. AXA and Affin have been exploring options for their Malaysian joint venture, which could fetch about US$650 million.

They are seeking around US$500 million on AXA Affin General Insurance Bhd., and as much as US$150 million from AXA Affin Life Insurance Bhd in a transaction. Deliberations are ongoing and the companies could decide not to proceed with an offer. 

AXA Affin General Insurance is among the top medical and health insurers in Malaysia, with 5,000 agents across the nation. The company underwrote RM1.44 billion (US$347 million) in gross earned premiums and posted a net income of RM100 million in 2018, according to its latest annual report. AXA Affin Life Insurance, set up in 2006, earned gross premiums of RM463.4 million in 2018, down from RM490 million a year earlier, its annual report shows. The company’s losses narrowed to RM8.1 million ringgit from RM17.7 million a year ago.

AXA owns 49.99 per cent of the Malaysian general business operations, while Affin Bank holds 49.95 per cent. In AXA Affin Life, Affin controls 51 per cent and the rest belongs to the French insurer.

Retail Woes - Australia

Yet another high-profile Aussie fashion brand has announced its stunning collapse. The company behind popular jewellery and accessories chain Colette by Colette Hayman – the CBCH group of companies – was placed into voluntary administration late last month, it has been revealed.

Deloitte Restructuring Services partners Vaughan Strawbridge, Sam Marsden and Jason Tracy have been appointed administrators, and in a statement released this morning, Mr Strawbridge said Australia’s dire retail climate was largely to blame for the business’s failure.

“Colette By Colette Hayman has, unfortunately, been impacted by the current weak retail environment, as have many others. Our focus is on continuing to trade the business while we seek either a recapitalisation of the group or a sale of the business. Given the strength of the brand we are confident we will be able to secure a future for the business and preserve the employment of as many people as possible”, Mr Strawbridge said.

Mr Strawbridge confirmed gift cards would be honored and employees’ wages and other entitlements paid out, and that the first meeting of creditors will be held on February 12.

The Colette store network includes 37 branches in NSW, 33 in Victoria, 30 in Queensland, 15 in Western Australia, six in South Australia, three in the ACT, one in Tasmania and one in the Northern Territory as well as 14 in New Zealand.

COLETTE’S EMPIRE - The brand was founded by designer Colette Hayman – known as the “Queen of Handbags”- in Australia in 2010. Ms Hayman and her husband Mark also launched budget-friendly jewellery chain Diva before selling up back in 2007, three years before the Colette chain entered the market.

Over the years, it exploded to become Australia’s biggest handbag empire, with around 180 stores across four countries, including Australia, New Zealand, the UK and Ms Hayman’s native South Africa.

Annual gross sales have soared to $140 million, with the company employing around 300 Aussie staff members. Over the years, Colette by Colette Hayman became a budget handbag and accessories icon which was renowned for its affordable and on-trend bags, clutches, jewellery, sunglasses and other accessories. It remained privately-owned for many years before selling a minority stake to investment giant IFM Investors in 2017 for an unknown sum.

‘APOCALYPSE’ HITS - The new decade got off to a rough start, with 161 popular Australian bricks-and-mortar stores earmarked for closure just one fortnight into the new year in what some retail analysts have dubbed Australia’s “retail apocalypse”.

Retail expert Dr Gary Mortimer said the crisis was far from over. “It has been a nightmare, and I think we’ll see this continue to happen over the next month. There would have been retailers out there hoping and banking on a strong Christmas, but unfortunately, I don’t think that has happened. We’re seeing this emerging trend (of retail closures) and commentators are terming it a ‘retail apocalypse", he said.

Dr Mortimer said while it wasn’t “the End of Days” for the retail industry as a whole, we were now well and truly in the grip of a “market correction” which he likened to Australia’s economic downturn in the 1990s, which was famously described as “the recession we had to have”.

SHOPPERS IN SHOCK - Australian have expressed their shock and sadness over the collapse on Facebook. "Bloody hell, this was my go to bag store. I wondered why the shop had gone really cr*ppy,” one social media user posted, while another added: “Not my fav bag shop!!! What’s going on?”

But others claimed they had seen the writing on the wall – with many predicting other Aussie retailers would likely follow suit.

“Won’t be the last as now in February and worst retail trading month of the year,” one reader posted, while another wrote: “Eventually there will only be online stores as people aren’t supporting retailers like we used to back in the day before online shopping. And rent is just so expensive and wages …”

RETAIL WOES - The announcement comes hot on the heels of a slew of other high-profile Australian businesses that have folded in 2020.

It started early on January 7 when it was revealed department store Harris Scarfe was set to shut 21 stores across five states over the course of just one month after the retailer was placed in receivership in December.

Just days later, McWilliam's Wines – the country’s sixth-largest wine company, run by the same family for more than 140 years – announced it had also appointed voluntary administrators.

Then it was popular video game chain EB Game's turn, with the business confirming it was closing at least 19 stores across the country within weeks, while fashion chain Bardot is also planning to shutter 58 stores across the nation by March.

In January it also emerged Curious Planet – the educational retailer previously known as Australian Geographic, which is owned by parent company Co-op Bookshop – would pull 63 stores across Australia after failing to find a buyer for the brand. Denim chain Jeanswest entered voluntary administration that month and tech giant Bose also revealed it would close all Australian stores and 119 across the globe largely as a result of the rise of online shopping.

The total confirmed number of bricks-and-mortar stores earmarked for closure has hit 161 this year alone. The latest chain to fall was German Supermarket Kaufland, which pulled out of Australia before it had even begun. Kaufland had invested millions into the expansion but made a hasty exit this year to focus on its European offerings.

This year’s dismal first fortnight for retail follows a horror 2019 that brought the collapse of a slew of Aussie businesses, with some international players also folding in recent months.

Last January, menswear retailer Ed Harry went into voluntary administration, and a week later, Aussie sportswear favourite Skins also revealed it was on the brink of failure after applying for bankruptcy in a Swiss court.

At the end of the month, the Napoleon Perdis beauty empire announced the cult make-up chain’s 56 Aussie stores had closed for stocktake. Administrators were appointed, and scores of stores have since collapsed.

Footwear trailblazer Shoes of Prey also met its demise in March last year along with British fashion giant Karen Millen, which in September revealed it would soon shut all Aussie stores, leaving about 80 jobs in peril.

In October, celebrity chef Shannon Bennett’s Melbourne burger chain Benny Burger was also placed into administration, followed by seven Red Rooster outlets in Queensland just days later and then Aussie activewear sensation Stylerunner, which has since been sold to Accent Group.

In November, it was revealed popular furniture and homewares company Zanui was in trouble after it abruptly entered voluntary administration, leaving angry customers in the lurch.

Later that month, Muscle Coach, a leading fitness company, was put into voluntary administration after a director received a devastating diagnosis and the company racked up debts of almost $1 million.

Then it was the famous restaurant chain Criniti's turn to enter into voluntary administration, with several of the 13 sites across the country set to close for good. It was closely followed by discount legend Dimmeys. 

Bone Breaking Scam Uncovered

Italian police on Monday dismantled two ‘bone-breaking’ gangs in Sicily which had been smashing victims’ limbs in order to stage road accidents and defraud car insurance companies.

Over 40 people were arrested in Palermo after investigators discovered hard-up victims were having their arms or legs broken in exchange for a small part of the pay-out from insurers, police said.

Those in on the fraud included false witnesses to the accidents, doctors providing fake medical reports, physiotherapy centres certifying care that was never provided, and a lawyer filing the claims, police said.

The victims were “people on the margins of society... drug addicts, alcoholics and the mentally ill.” They were promised a cut of the insurance pay-out, but took home as little as 300 euros (US$340).

The gang broke upper or lower limbs – referred to in code as the “first floor” and “ground floor” – by throwing cast-iron body-building weights at their victims or beating them with iron bars, police said.

Police initially uncovered the scam in 2017 after the death of a Tunisian who initially appeared to have died in a road accident, but was discovered during the autopsy to have had a heart attack after a beating. He had been given crack cocaine to minimise the pain.

Eleven people were arrested in a first operation against two other gangs in Sicily last August, and three of them turned state witness, leading police to investigate some 250 suspects.

Around 60 attacks were uncovered in wiretaps, with the criminals preferring to target teenage single mothers because the payouts were bigger. The victims were taken to isolated apartments or warehouses, and given mild painkillers or ice packs to numb their limbs.

The arms or legs were suspended between blocks of concrete and a bag of iron weights or large stones were thrown at them to fracture them, police said. Multiple fractures were better because they were subject to larger payouts.

Five of those arrested Monday specialised in the bone breaking, according to the Giornale di Sicilia local daily, including one dubbed “Tony the Meek.”

The head of one of the gangs drove a luxury car and owned a speedboat, reports said. The road “accidents” were staged in areas not covered by video surveillance cameras. Gang members would then pose in hospital as the victims’ relatives, to ensure they stuck to the story.

InsureTech Drives Microinsurance

Insurers need to redefine their value propositions so that the working population stops regarding their products as expensive and “nice to have” rather than necessary protection. Life Insurance Association of Malaysia (LIAM) suggests that insurers repackage their offerings in terms of financial wellness, rather than just, say, life insurance. To remain relevant, life insurance products need to be dramatically altered so that consumers understand, value and want them. 

Insurers could change their approach and improve their offerings through microinsurance - coming up with life coverage with bite-sized premiums. Small-ticket insurance coverage, also known as sachet or bite-size insurance, are non-comprehensive plans that focus on specific needs and come with low premiums and lower cover. Such policies help to boost insurance penetration and, in turn, reduce inequality.

Insurers have to change the mindset that insurance is expensive. Today, if you want insurance only for critical illnesses, it can be provided. You can recover from critical illness and get on with your life, but you will need funds to support your treatment cost. That is where bite-sized coverage helps.

The effects are more pronounced among lower-income groups and micro- and small enterprises, especially when they are disproportionately impacted events such as the death or incapacitation of a breadwinner, or business disruptions.

The growth of life insurance and takaful in the country has been sluggish in the last few years as penetration, in terms of total premiums to Malaysia’s gross domestic product, remained low at 4.8% (Bank Negara Malaysia).

The penetration rate of life insurance and takaful has been hovering at about 54% in the last five years. If you eliminate multiple ownership of policies, the figure drops to 41%. Of the figure, only 4% of households in the bottom 40% (B40) of the population have some form of life coverage.

Even then, the 4% that have some form of protection are not sufficiently covered. The average sum assured in Malaysia is about RM50,000, which is grossly inadequate. On average, the gap ranged between RM100,000 and RM150,000. A family of five will need at least RM553,000 to survive for the next five years if the breadwinner is incapacitated or has passed away.

Of the 50.4% of 16 million working adults aged between 20 and 59, some 7.8 million are uninsured. And of that number, 3.9 million are in the B40 group. The B40 segment is highly vulnerable to financial shocks. But seeing as their income is spent on basic needs such as food and shelter, insurance is not seen as a priority. There is not a compelling motivation to get insurance protection and most only think about it after a tragedy strikes.

Currently, six life insurance companies are offering plans under the Perlindungan Tenang scheme, with premiums from as low as RM3 a day and sum assured of between RM10,000 and RM30,000.

Microinsurance products growth are driven by insurance technology (insurtech) space, which has paved the way for insurers to lower their cost of capital to help fulfil the nation’s aspiration of reducing the protection gap. Insurtech offers bite-sized products, which are very affordable.

These developments also come at an opportune time as medical expenditure in Malaysia is among the highest in the region. About 43% of medical expenditure in Malaysia is covered government hospitals, which translates to about 10% of the country’s GDP, while 38% is out-of-pocket expenditure and 7% is covered insurance companies.

If healthcare cost is no longer sustainable, the increase in premiums is inevitable. This may lead to lapses in the premiums of medical policies and result in more people relying on medical treatment at government hospitals. That is why having sachet insurance for medical needs could lead to sustainable healthcare costs in the long term. Microinsurance products will continue to grow in the near future as people become more aware, are better educated and tech-savvy, and understand the importance of financial protection for themselves and their loved ones.

Innovation is not limited to products but also includes intermediaries, that is, insurance agents. Agents are still the leading distribution channel followed bancassurance, direct marketing and financial advisers. There are about 75,700 life insurance agents and 20,000 bank employees in the industry. Only 25% of the 75,700 agents are working in the field full-time.

One of the initiatives is the balanced scorecard for intermediaries, which sets out a basic structure for insurance companies to remunerate their agents, so as to achieve outcomes that will benefit consumers.

MySalam - Covers 8 Million Malaysian

The MySalam public health insurance scheme was extended today and is expected to cover up to eight million Malaysians in 2020, said Finance Minister Lim Guan Eng. He said the scheme will now also cover Cost of Living Aid (BSH) recipients and their spouses up to the age of 65, as well as single or disabled BSH applicants.

“The scheme will now cover a total of 45 critical illnesses including polio, compared to only covering 36 critical illnesses before,” Lim said during the officiation of the scheme’s coverage expansion at the ministry’s complex. The government is also aware of the financial difficulties faced by the M40 category during health emergencies. To this, it has been decided to expand the scheme’s coverage to individuals with a gross income of less than RM40,000 per annum,” he said.

The minister added those covered under the scheme’s expansion also include Malaysians in the M40 and B40 percentiles. Lim added the coverage will also include a one-off critical illness payment of RM4,000, RM50 daily as hospitalisation income replacement, and up to 14 days or RM700 in fees per calendar year at any government hospital. Ultimately, what we want to provide is a safety net for those with critical illnesses, so that at least there is something for them.

Over 4.3 million people from the B40 category who are listed for BSH assistance and between the ages of 18 and 55 were protected by MySalam in 2019. Over 9,600 people have successfully received assistance worth over RM13.7 million. Of this number, 1,448 individuals were for critical illnesses and 8,214 for hospitalisation income replacement.

Cross-Border Insurance Scam Hong Kong

Hong Kong-based beneficiary of two life insurance policies has been sentenced to 25 months’ imprisonment for her role in a fraudulent death claim which could have seen her waltz away with as much as $780,000 (£626,000, €706,000).

Fang Liu pleaded guilty to one count of conspiracy to defraud after she was charged by the Hong Kong Independent Commission Against Corruption (ICAC).

In sentencing, judge Ernest Lin Kam-hung said the court had to “mete out a deterrent sentence as the defendant was a key culprit of a premediated cross-border insurance scam”. The judge added that the fraud could have “increased the operational costs of insurance companies in vetting insurance claims, and the burden would be shifted to members of the public”.

Details of the case - Hong Kong-based Dah Sing Life Assurance received two applications from a mainland policyholder, one in March 2015 and another in July of the same year. They were submitted by one of the insurer’s own agents.

After the applications were approved, Dah Sing Life issued two policies to an unnamed individual with a basic sum assured of $380,000 and additional insured sum totalling $400,000.

As the sole beneficiary, Liu was entitled to receive a maximum of $580,000 if the policyholder died of natural causes or $780,000 for accidental death.
Death certificate

In a meeting held around May 2016; Liu, the policyholder and the insurance agent agreed for the defendant to submit a death claim to Dah Sing Life by “falsely representing” that the policyholder had died to “deceive the insurer of a compensation of about HK$5m (£512,000, $639,000, €578,000)”, according to the ICAC.

As arranged by the policyholder, Liu obtained a fake death certificate that month bearing the name of the policyholder and their employer, which was a power supply company in Jinzhong, Shanxi Province.

The certificate stated that the policyholder died of a sudden heart attack on 26 May 2016, and was buried four days later. To meet the insurance company’s requirements and prove how the policyholder had died, Liu also obtained a medical certificate of death on 2 June 2016 from a community health service centre.

She then had to secure a deregistration certificate from a police station in Jinzhong.

On the following day, Liu, accompanied by the insurance agent, submitted a death claim form supported by the death certificate and the deregistration certificate to Dah Sing Life, now known as Tahoe Life Insurance.

The court heard that the power supply company had never issued the death certificate, while colleagues of the policyholder had met him alive on different occasions in 2017.
Financial planner case

Elsewhere, the ICAC has charged a former senior financial planning manager of China CITIC Bank International (CNCBI) with fraud.

Yuk-lam Chui “defrauded the bank of commission by falsely representing that eight insurance applications were referred by a relationship manager of the bank”, the ICAC said.
He faces one count of fraud, contrary to Section 16A(1) of the Theft Ordinance.
Partnership

Sometime before June 2016, CNCBI entered into a partnership scheme with an insurance company to promote its products. Chui was a senior financial planning manager employed by CNCBI under the scheme and promoted the insurance products to the bank’s clients.

Relationship managers of CNCBI could also refer bank clients to financial planning managers for taking out insurance policies of the insurance company. Commissions would be paid by the bank to its relationship managers, depending on their quarterly performances.

The charge alleges that, between 3 June and 20 September 2016, the defendant “falsely represented” to CNCBI that one of its relationship managers was the referee of eight insurance applications of the insurance company.

In addition, with “intent to defraud”, Chui “induced CNCBI to take into account the eight insurance applications when calculating the commission to be payable to that relationship manager”, the ICAC said. In reality, the commission was to be paid to Chui.

Renting Dead Body To Scam Life Insurer

South Africans are renting, and buying, dead bodies to falsely lay claim to funeral benefits. Life insurers rejected 1,915 funeral claims worth R176.4 million in 2018, of which 1,127 were found to involve fraudulent documentation.

Another 156 fraudulent claims showed syndicate involvement – and in seven cases beneficiaries were found to have caused the death of the policyholder. Funeral policies don’t require blood tests and medical examinations and are designed to pay out quickly when an insured family member dies.

This makes it tempting for criminals and dishonest individuals to take out funeral cover for people who do not exist with the intention of later submitting claims using death certificates issued for dead bodies rented or bought for the purpose of committing fraud.

fraudulent and dishonest claims lead to honest policyholders being penalized and will ultimately end up footing the bill through higher premiums driven by untenable claims rates.
Overall, South African life insurers detected 3,708 fraudulent and dishonest claims to the value of R1.06 billion in 2018 - and most of the fraudulent activity in 2018 took place in the funeral insurance space.

The 2018 fraudulent and dishonest claims statistics, released this week by ASISA, show that the total number of irregular claims was lower in 2018 than in 2017, but the claims value remained almost the same.

In 2017, life insurers detected 5,026 fraudulent and dishonest claims worth R1.13 billion.
Life insurers owe it to honest policyholders to protect the integrity of the long-term insurance model by preventing fraud and dishonesty. While life insurers are frequently accused by the public of trying to avoid paying claims, the numbers tell a different story.

In 2018, life insurers paid 99.3% of claims made against fully underwritten individual life policies alone, to a value of R15.1 billion.