Malaysia Insurance Updates

Malaysia’s life insurance industry recorded a 6.9% growth in insurance protection to RM1.17 trillion for all policies combined in 2014, its industry body said on Friday. The Life Insurance Association of Malaysia (LIAM) said the amount was 6.9% higher than the RM1.09 trillion in 2013.

“The sum assured per capita in 2014 has also recorded an increase to RM38,449 from RM36,387 in 2013,” it said. LIAM president Vincent Kwo said the healthy performance of the life insurance industry reflected the people’s rising awareness on the importance of insurance protection. 

 

Malaysia’s life insurance industry provided insurance protection to 12.4 million lives (counting lives with multiple policies as separate lives) in 2014, an increase of 148,574 when compared with year 2013. Kwo said the increase in the number of lives covered by life insurance and higher sum assured protection reflected a higher level of financial literacy among Malaysians. 

 

However, based on the Protection Gap Study undertaken by University Kebangsaan Malaysia and LIAM in 2013, there is still a huge protection gap for families with life insurance. 

“On average, the gap ranges from RM100,000 to RM150,000. This means that the average sum assured of RM38,449 is still way below the amount needed to support one family member in the event of the death or disability of the breadwinner,” said Kwo. 

 

He added the current penetration rate, as at 54%, was considered low as the government’s plan was that 75% of Malaysians be insured by 2020. “There is a need to develop suitable insurance products to meet the different life stage needs of customers and introduce new delivery channels to reach out to the remainder 50%, of which a high percentage of the population could be concentrated in the rural areas.
 

“Additionally, insurers could also leverage on their existing customer base for upselling or cross-selling initiatives given that even among those who have insurance coverage, in most cases they were not adequate,” he added. 

 

Based on preliminary figures, the life insurance industry in Malaysia grew by 5.5% in 2014, as measured by new business annual premium equivalent (APE).  APE comprises of the 10% single premium and 100% annualised premium. 

New business total APE in 2014 was RM4.71bil as compared with RM4.47bil in 2013. 

As for group insurance business, it recorded a 5.1% growth. In terms of individual business, investment-linked policies continued to outpace traditional policies with the former growing at 11.1% compared with the latter which shrunk by 1.6%. 

On total new premium basis, the industry grew 9.3% in 2014, with total premium volume recording RM8.95bil. The total premium for in-force policies grew moderately at 5.8% in 2014 for individual and group policies combined.

The life insurance industry also registered an increase of 21.3% in claims payouts amounting to over RM8.4 billion as compared with RM6.9 billion in 2013. The high growth in claims payouts was contributed mainly by higher medical claims and bonus payments to policyholders. 

Medical claims increase was contributed mainly by strong growth in medical insurance business in recent years and partly by medical inflation. 

Increase in bonus payments was mainly due to the increased popularity of the cash bonus type of policies in recent years. The increase in death claims meanwhile was moderate at 7.6% in line with the increase in in-force sum assured 

 

Commenting on the outlook for 2015, Kwo said the economy’s strong fundamentals would continue to underpin the life insurance industry with expectations of a robust strong single digit growth.

Sole Proprietorship

A Sole Proprietorship is a simple type of business structure that is owned and operated by the same person. It does not involve many of the complex filing requirements associated with other types of business structures such as corporations. Sole proprietorships allow persons to report business income and expenses on their individual tax returns.

Sole proprietorships are attractive to small investors because they are relatively easy to start up. Also, the owner is entitled to all the profit that the sole proprietorship collets. On the other hand, sole proprietorships can be risky because there is no separation between the owner and the business.
 

In other words, the owner remains personally liable for any losses or debts that the sole proprietorship incurs. They can also be held legally responsible for violations committed by the business or its employees. A sole proprietorship can best be summed up by the phrase, “You are the business”.

What are some of the Advantages of a Sole Proprietorship?

There are many reasons why a person would choose to start their business up using a sole proprietorship structure. Some of the main advantages of sole proprietorships include:

• Ease of formation: Starting a sole proprietorship is much less complicated than starting a formal corporation, and also much cheaper. The proprietorship can be named after the owner, or a fictitious name can be used to enhance the business’ marketing
• Employment: Sole proprietorships can hire employees. This can lead to many of the benefits associated with job creation, such as tax breaks. Also, spouses of the business owner can be employed without having to be formally declared as an employee. Married couples can also start a sole proprietorship, though liability can only assumed by one individual
• Decision making: Control over all business decisions remains in the hands of the owner. The owner can also fully transfer the sole proprietorship at any time as they deem necessary

What are the Disadvantages of Sole Proprietorships?

Forming a sole proprietorship does involve some risks, mainly to the owner of the business, as legally speaking they are not treated separately from the business. Some disadvantages of sole proprietorships are:

• Liability: The business owner will be held directly responsible for any losses, debts, or violations coming from the business. For example if the business must pay any debts, these will be satisfied from the owner’s own personal funds. The owner could be sued for any unlawful acts committed by the employees.
• Lack of “continuity”: The business does not continue if the owner becomes deceased or incapacitated, since they are treated as one and the same. Upon the owner’s death, the business is liquidated and becomes part of the owner’s personal estate, to be distributed to beneficiaries. This can result in heavy tax consequences on beneficiaries due to inheritance taxes and estate taxes
• Difficulty in raising capital: Since the initial funds are usually provided by the owner, it can be difficult to generate capital. Sole proprietorships do not issue stocks or other money-generating investments like corporations do

So, while sole proprietorships do not necessarily create more liabilities, they do expose the business owner to a risk of being sued. Lawsuits can be filed against the business owner for legal violations, as well as to collect any outstanding debts.

A Hero We Will Miss

Throughout his lifetime, Nik Aziz always struck a humble figure. Despite having the most powerful position in a party that boasted about one million members, and retaining the Kelantan menteri besar post for over two decades, the religious teacher was content staying in his old kampong house and driving around in his own car.

Top Insurers

Insurance helps us to do exactly what this quote suggests. We all face many kinds of risks: risk of meeting with an accident, falling sick, being a victim of a natural disaster or fire, and above all risk of life. All these risks not only come with pain and suffering but also hurt financially. Insurance is one way of being prepared for the worst; it offers the surety that the economic part of the pain will be taken care of. In this article, we take a look at some of the top insurance companies. There are many criteria on the basis of which, such a list can be prepared: premium collections, market capitalization, revenue, profit, geographical area, assets, and more. This list focuses on insurance companies with the largest revenues across the globe (in no particular order).


1) AXA
With over 102 million customers in 56 countries and an employee base of 157,000, AXA is one of the world's leading insurance groups. Its main businesses are property and casualty insurance, life insurance, saving, and asset management. Its origin goes back to 1817 when several insurance companies merged to create AXA. The company is headquartered in Paris and has a presence across Africa, North America, Central and South America, Asia Pacific, Europe, and the Middle East.
In 2013, AXA as a move to increase its foothold in Latin America acquired 51% of the insurance operations of Colpatria Seguros in Colombia. During the same year, AXA became the largest international insurer operating in China as a result of its 50% acquisition of Tian Ping (a Chinese property and casualty insurer). In addition, the company acquired the non-life insurance operations of HSBC in Mexico. The AXA Group reported consolidated gross revenue of €91 billion for the year 2013.


2) Zurich Insurance Group
Zurich Insurance Group, a Switzerland-headquartered global insurance company, was founded in 1872. Zurich Group, together with its subsidiaries, operates in more than 170 countries, providing insurance products and services. The core businesses of Zurich include general insurance, global life, and farmers insurance. With its employee strength of over 55,000, Zurich caters to the vast insurance needs of individuals and businesses of all sizes: small, mid-sized and large-sized companies and even multinational corporations.


During 2013, Zurich Insurance Group posted a business operating profit of $4.7 billion (15% higher than 2012). Of this, general insurance contributed 51%, while global life and framers contributed 23% and 27% respectively. Total revenue was reported as $72 billion.


3) China Life Insurance
China Life Insurance (Group) Company (LFC) is one of Mainland China’s largest state-owned insurance and financial services companies, as well as a key player in the Chinese capital market as an institutional investor. The origin of the company goes back to 1949 when the People's Insurance Company of China (PICC) was formed. Its offshoot PICC (Life) Co. Ltd was created after parting ways with PICC in 1996. PICC (Life) Co Ltd was renamed as China Life Insurance Company in 1999. The China Life Insurance Company was restructured in 2003 as China Life Insurance (Group) Company, which has seven subsidiaries. The businesses are spread across life insurance, pension plans, asset management, property and casualty, investment holdings, and overseas operations.
The company is listed on the New York Stock Exchange, the Hong Kong Stock Exchange, and the Shanghai Stock Exchange, and is the biggest public life insurance company in terms of market capitalization in the world.


4) Berkshire Hathaway
Berkshire Hathaway Inc. (BRK.A) was founded in 1889 and is associated with Warren Buffet, who has transformed a mediocre entity into one of the largest companies in the world. Berkshire Hathaway Inc. is now a leading investment manager conglomerate, engaging in insurance, among other sectors such as rail transportation, finance, utilities and energy, manufacturing, services, and retailing through its subsidiaries.


It provides primary insurance, as well as reinsurance of property and casualty risks. Companies like Berkshire Hathaway Reinsurance Group, GEICO, Berkshire Hathaway Primary Group, and General Re, National Indemnity Company, Medical Protective Company, Applied Underwriters, U.S. Liability Insurance Company, Central States Indemnity Company, the Guard Insurance Group are subsidiaries of the group.


5) Prudential plc
Prudential plc (PUK) is an insurance and financial services brand with operations catering to 23 million customers across Asia, the US, and the UK. Prudential plc was founded in United Kingdom in 1848. Prudential Corporation Asia, Prudential UK, Jackson National Life Insurance Company, and M&G Investments are the main businesses within the group. Jackson is a prominent insurance company in the United States, while Prudential UK is one of the leading providers of pension and life.

Prudential plc is listed on the stock exchanges of London, Hong Kong, Singapore, and New York. It has approximately 22,308 employees worldwide, with assets under management worth £443 billion.


6) United Heath Group
The UnitedHealth Group Inc. (UNH) tops the list of diversified health care businesses in the United States. Its two business platforms--UnitedHealthcare for health benefits and Optum for health services--work together, serving more than 85 million people in every US state and 125 countries. The UnitedHealth Group uses its experience and resources in clinical care to improve the performance of the health care services sector.


The company reported revenue of $122 billion in 2013, nearly $12 billion more than in 2012. Fortune has featured UnitedHealth Group as the "World’s Most Admired Company" in the insurance and managed care sector four years in a row: 2011, 2012, 2013, and 2014.


7) Munich Re Group
Founded in 1880, Munich Re Group operates in all lines of insurance and has a presence in 30 countries, with focus on Asia and Europe. The company’s primary insurance operations are carried out by its subsidiary, ERGO Insurance Group, which offers a comprehensive range of insurance, services, and provision. Munich Re Group's home market is Germany, where ERGO is a leader in all areas of insurance. The Group has a new arm, Munich Health, which parlays the group’s risk-management and insurance expertise into the health care field.


The group has around 45,000 employees worldwide, working in all businesses of insurance: life reinsurance, health reinsurance, accident reinsurance, liability business, motor reinsurance, property-casualty business, marine reinsurance, aviation reinsurance, and fire reinsurance. The Munich Re Group reported a profit of €3.3 billion on premium income of €51.5 billion in 2013.


8) Assicurazioni Generali S.p.A.
Assicurazioni Generali, founded in 1831, is the Assicurazioni Generali Group’s parent company. The Generali Group is not only a market leader in Italy, but is also counted as a prominent player in the field of global insurance and financial products. The Group, with a presence in more than 60 countries, is an international brand with dominance in Western, Central, and Eastern Europe. The Generali Group’s prime focus has been life insurance, offering diverse products from family protection and savings polices to unit-linked insurance plans. It offers an equally diverse range of products in the non-life segment as well, such as coverage of car, home, accident, and health, along with coverage of commercial and industrial risk.


The group has 77,000 employees and a client base of 65 million people worldwide. The group wrote premiums worth €66 billion: 32% property and casualty premium and 68% life premiums. The group reported operating income of €4.3 billion in 2013.


9) Japan Post Holding Co., Ltd.
The Japan Post Holding Co., Ltd. is a major state-owned conglomerate in Japan. The company has four primary divisions: Japan Post Service (for mail delivery), Japan Post Network (runs the post offices), Japan Post Bank (deals with banking functions), and Japan Post Insurance (provides life insurance). Japan Post Insurance operates within Japan Post Holding to provide insurance to its clients. The insurance arm makes use of the post offices nationwide network, in addition to its own sales offices, to reach out and provide services to the clients.


Japan Post Holding has a strong balance sheet with a profit of $4.891 billion and 2013 revenues of nearly $204 billion. The group, which runs the largest insurer in Japan (Japan Post Insurance), has a goal to go public in the US sometime in 2015.


10) Allianz SE
Founded in 1890, Allianz SE is a leading financial services company, providing products and services from insurance to asset management. Allianz caters to customers in more than 70 countries with €1.77 billion worth of assets under management. Insurance products range from property and casualty products to health and life insurance products for corporate and individual customers.
In 2013, the Allianz Group reported total revenues of €110.8 billion and an operating profit of €10.1 billion. In terms of revenue, segment contributions were as follows: property and casualty (42%), life and health (51%), asset management (7%) and corporate, other (1%). In terms of operating profit, the contributions by property and casualty, life and health, and asset management were 47%, 24% and 28% respectively. The company is headquartered in Germany.


Bottom Line
Some of the other reputable names in the insurance business are ING Group (ING), Prudential Insurance Company of America (a subsidiary of Prudential Financial, Inc., PRU), AIA Group Ltd., Ping An Insurance Company of China, Ltd., American International Group, Inc. (AIG), Manulife Financial Corporation (MFC), and MetLife, Inc. (MET). Picking the right insurance company to invest in is important and should not based on a company's revenue collections alone. A few things on your check list should be the company's rating, its financial strength, if the company specializes in any particular type of insurance, refusal of claims in the past, proximity of office, premium rates, and discounts offered on multiple policies. (For more, see: Top 10 Insurance Companies By The Metrics.)

Businessman Insurance

SIAM COMMERCIAL BANK has formed a special team to sell life insurance to business owners and deal with rising demands from these customers, as a key attraction of these policies is that beneficiaries are not required to pay the new inheritance tax.

Araya Phuphanich, SCB first executive vice president for bancassurance, said that in general, savings policies were the mainstream bancassurance products because of their simplicity - they are easy to describe to customers. Life insurance is a more sensitive matter, so it needs more explanation to prospective customers. The bank is training staff to strengthen the special sales team.

Ideally, complex products should handled by agencies, but there is demand from SCB's business customers for them, so it needs to be prepared to accommodate their requirements.

With savings insurance, policyholders receive the insured sum when their policy matures. However, with life insurance, the beneficiary will receive the insured sum when the policyholder dies. That is why premiums for life insurance are higher than for savings insurance.

At SCB, life insurance accounts for a small share of premium income. This year, the bank targets new business premiums from life insurance of about Bt2 billion out of total new business premiums of Bt14 billion.

Most premiums will continue to come from savings insurance. The minimum annual premium for life insurance is Bt700,000, which is regarded as a big-ticket item, so the bank must boost the expertise of staff at its branches.

SCB has 20 special staff focusing on life insurance.  SCB has witnessed rising demand for life insurance from large companies and corporations since late last year.

Business owners have told the bank that they want financial security for their families.

The inheritance tax is among the considerations for business owners.  Last year, new business premiums from bancassurance surged 24-25 per cent to Bt1.05 billion at the bank.

To offer a wider variety of life products, the bank is joining with two partners - SCB Life Assurance and ACE Life Assurance - to design policies to deliver to the bank's customers in all segments.

SCB expects non-life insurance premiums of Bt4 billion this year, the same as last year. However, the bank will focus more on personal accident and health insurance and less on property insurance and auto coverage, Araya said.

Reduce Sum Assured

The 68-year-old man had owned successful commercial real-estate business that was leveled by the financial crisis of 2008.
 

He used what was left of his resources to start a new venture after the recession. But four years later the new company was still struggling to find investors and the man’s liquid assets were running low.

Despite cutting his household expenses, he needed more cash on hand to run the business. So he set his sights on another potential cut: Dropping the $500,000 life-insurance policy he shared with his wife. Ceasing premium payments could save another $700 a month to put toward his business.

He raised the idea with his adviser, Jeff Motske, president of Trilogy Financial in Huntington Beach, Calif. The firm has 11 branches and manages $2 billion for 50,000 clients.

Mr. Motske had worked with the client for years and knew about his recent struggles. He also knew that dropping his life insurance was a bad idea. “He was in a very tough spot,” Mr. Motske says. “But despite that desperation, I needed to help him understand that this wasn’t the right move.”

Mr. Motske emphasized the policy’s value, not its cost. The man had originally purchased the insurance for estate-planning purposes. With the majority of the couple’s wealth tied up in property, the death benefit could provide their estate with some liquidity. Since that time, though, the couple’s situation had changed considerably. Not only had the client’s business foundered, his wife had developed a debilitating illness that left her legally blind.

“The client still thought of this policy as a somewhat expendable estate-planning tool,” Mr. Motske says. “But given his wife’s condition and future medical needs, it had become a far more critical safety measure.” In light of their recent financial troubles, the adviser explained, the benefit would provide an important income stream for the client’s wife in his absence. What’s more, Mr. Motske reminded the client that the policy had a provision that allowed either of them to draw on the death benefit during their lifetimes if they needed long-term care. That would take considerable pressure off his wife should he become incapacitated.

“There was a noticeable mental shift in him,” the adviser says. “Once he recognized the role this policy played in the future security of his family, he didn’t take much more convincing.”

The client agreed that he needed to find another solution. Mr. Motske cautioned the man not to look at crucial pieces of his financial safety net, like his investment accounts.

Instead, he reminded his client that he needed only a few hundred more dollars a month in cash, and encouraged the man to take an even harder look at what was really expendable. Ultimately, the client saw that he could cut costs by forgoing a few rounds of golf each week and leasing a less expensive company car--expenses the man had believed were critical to his business image.

“Now that he understood how important the insurance was to his family, the client was more than willing to make those other sacrifices,” Mr. Motske says.

Sadly, the decision paid off sooner than the client or Mr. Motske had anticipated. The man died of a heart attack six months later. A portion of the death benefit paid off his business’ debt and tax liability, and the rest went to his widow--who was grateful to Mr. Motske for convincing her husband to retain the policy.

“The best advice for a client isn’t necessarily what they want to hear,” Mr. Motske says. “But when you can present a solution with the conviction that it’s truly the best for them and their family, the decision to do what’s right becomes much easier.”

Best Dividend EPF

The Employees Provident Fund (EPF) will declare a dividend of 6.75% for last year to its 14 million members, sources said.

The payment was the highest since 1999, when the dividend was 6.84%, the source said.
"EPF chief executive officer Datuk Shahril Ridza Ridzuan will make the official announcement tomorrow,"  the source told The Malaysian Insider.

The source said the EPF board met with stakeholders, including representatives of the government and employers, to convey its decision about the pay out.

The Edge Financial Daily reported yesterday that the pension fund expected to sustain its high payout ratio by declaring a higher dividend payout for 2014 compared with 6.35% for 2013 and 6.15% for 2012.

The dividend rate of 6.35% for 2013 was declared on the back of a record gross investment income of RM35 billion, a 12.8% rise from RM31.02 billion in 2012.

The EPF delivered investment income of RM10.32 billion for the third quarter ended September 30, 2014 (3Q 2014), up RM205.58 million from RM10.11 billion in 3Q 2013.

The daily further said the 3Q14 performance was driven mainly by equity investments, with the asset class contributing 61% to the total quarterly investment income.

The EPF in November last year said it aimed to provide at least 2% of real returns to members over a three-year rolling period.

A higher dividend rate announcement for 2014 would be a welcome surprise to many despite the lacklustre performance of the FBM KLCI last year.

Shahril in November warned that the domestic and global equity markets had started to show signs of greater volatility, when announcing the fund’s 3Q 2014 investment results.

Piggy Bank Or EPF

It's a far, far better thing for funds from the Employees Provident Funds, better known by its acronym of EPF, to be used to pay off contributor debts than for it to be used to bail out crony companies or backstop government supported IPOs.

There is a debate ongoing via the opinions written in the online media these last few weeks, all fiery nouns and burly adjectives on who actually owns the EPF funds, what its actual use is supposed to be for and if withdrawing it for debt settlement is kosher.

The suggestion to allow EPF withdrawals for debt settlement came at the footsteps of reports of increasing household debts which continue to burdens Malaysians, pushing many to the brink of insolvency if not straight into bankruptcy.

As of now, reports noted that household debts account for over 80 per cent of the GDP and credit card use as well as illegal borrowings from loan sharks and short-term loans from banks are increasing by the year.

Some quarters have called for the retirement saving scheme to allow more withdrawals to allow debt-ridden depositors to clear some of their debts.

This received brickbats from those who believe that EPF's sole function is to be the safety net for retirement purposes and should not be squandered away lest we be destitute in our then not so golden years. 

There is perhaps some credence to this as recent reports have highlighted how many Malaysians straddled with debts find only poverty in retirement as they either lack savings of have them wiped out by debts.

But be that as it may, being declared bankrupt will probably damage one's ability to survive during retirement more than having less EPF balance.

And more importantly as argued by those against disallowing EPF withdrawals for anything including debt settlement, is that in the final analysis, EPF fund should actually belong to the depositors and is not demesne of the agency nor the government.

These more liberal views with EPF monies and opposed to any austerity-like measure on the retirement fund believe that as it is the depositor's money, they should not only be able to use it to pay for debts or other expenses, but also to remove it in entirety.

The argument is that EPF may actually be shortchanging depositors with low dividends anyhow and contributors should have the choice to take their money out and put it in higher yielding private sector-managed investment funds or portfolios.

This can lead to spendthrift behaviour but may also teach many more cogent financial discipline and even let them increase investment yields from the money which is their own anyway.

But whichever side of the argument you take, the important thing to perhaps look at is not really depositor investing, debt load or spending behaviour but perhaps at the policies of the EPF in what they do with the contributor's money which they oversee.

The operative words here are "contributor's money" and "oversee".

My personal fear and concern is that while national oil firm Petronas has always been the cow that is milked by the government day-in and day-out, EPF has been treated like the government's private petty cash.

Indeed the retirement savings scheme has been the fall guy, as the institutional buyer that will step in to underwrite.

I know that underwriting stocks offerings is supposed to be a banking function, but in Malaysia there is almost no risk borne by underwriting banks as there will always be institutional buyers like the EPF that will buy massive chunks of IPOs.

Case in point was the Felda Global Venture or FGV IPO.

In this way, it is funds like EPF that actually bear the risks as the banks, financial consultants along for the ride and companies aligned to the powers that be that make quick profits.

When stocks like FGV saw their prices fall because of weak fundamentals, it is the EPF and others that will be left holding the bag, as they will be holding below par value paper for the cash they already paid out at a higher price.

In a way this is similar to what some say is the US government 'raid' on federal pension funds by borrowing monies from it to avoid default by circumventing breaking the debt ceiling and at the same time cutting pension benefits.

A concern that is not only seen in today's Obama Administration but also under previous presidents. Indeed if I am not mistaken our own government has borrowed from the EPF too, for purposes vague and unspecified.

Such is the danger to EPF contributors as their money has seen such wheeling and dealing that enriches others and may leave them all the poorer without their say so.

Worrisome enough perhaps to see a paraphrasing of the American Revolutionary war cry of "no taxation without representation", as "no EPF investment without representation" by labour unions since late last year.

Indeed as for all these arguments go perhaps it is better for EPF funds to be withdrawn by depositors to pay for their own debts than it to be used willy-nilly by the powers that be as if it is their father's trust fund to bail out cronies or some such.

Or as the northerner in me would remark in a more colourful way, "Suka hati la apa aku nak buat dengan duit aku. Bukannya duit bapak hang kan?”

In the end it is perhaps better to put one's own money in one's own hand rather than let hypocrites talk about enforcing savings when it is they who are dipping into the honey pot so to speak.

If You Fail - Try Again

"If at first you don't succeed, try, try, try again."

This 19th-century saying by British educational writer William Edward Hickson has been adapted for use by technology entrepreneurs in Silicon Valley and elsewhere today.
They call it "fail fast, learn quickly".

The emphasis is on learning quickly, rather than failing, for it would otherwise be insane to seek out failure, said innovation management guru Scott Anthony.

The Singapore-based managing partner of global innovation consulting firm Innosight said: "Every innovative idea is partially right and partially wrong, so the goal is to learn which is which and what to do about it."

This notion of failing and learning fast was raised by Prime Minister Lee Hsien Loong during the launch of the Smart Nation programme last November. Singapore schools need to imbue students with tech skills as well as the Silicon Valley mindset of "fail fast, learn quickly" so that they can create the technology of the future, he said.

A Smart Nation Programme Office has been set up. Headed by Minister for the Environment and Water Resources Vivian Balakrishnan, it aims to get citizens, government and industry players to use technology and smart solutions to make life better.

Examples include using sensors to monitor the movements of the elderly at home for illness or falls, and developing 3D maps layered with information.

As PM Lee said: "Imagine if we can tap on everyone's local knowledge and anyone can contribute data: animal sightings, traffic incidents, potential hazards for cyclists, even the best mee pok or nasi lemak!"

Dr Balakrishnan said: "There will be many failed projects, but we need to learn and persevere in the face of these failures, not give up in despair. Our attitude to success and failure must change."

Start-up culture
FAIL fast, learn quickly comes from the lean start-up movement pioneered by Silicon Valley entrepreneur Eric Reis.

His 2011 book The Lean Start-up: How Today's Entrepreneurs Use Continuous Innovation To Create Radically Successful Businesses is the bible for those wishing to build sustainable businesses through innovation.

It applies to start-up entrepreneurs and corporate executives who have to penetrate the fog of uncertainty when building new technologies, products or services.

Lean methodology means focusing on continuous experimentation and validating business hypotheses with customers to find out what works.

It means getting a quick viable product out the door that customers can use and give feedback on, and using that feedback to improve the product.

Businesses these days have to adopt this concept because "customer demand is relentless and product life cycles continually shrink", said Mr Anthony. "Companies therefore need to continually innovate or lose out to more nimble competitors."

As serial entrepreneur Ong Peng Tsin noted, start-ups create new technologies, products or services. In such an environment, "it would be foolish to assume you know things that it's not possible to know until you build it".

People who attempt to create new things  "must be willing to fail again and again" until they find the right mix that will "win in today's competitive business environment", he added.
What does "fail fast, learn quickly" look like in the real world of business?

The pivot
TAKE bemyguest.com. It started in 2012 as an online portal for people to buy travel packages and book local tours and activities. Co-founder Clement Wong tracked the business but found that six months later, travellers had not picked up on the idea.

He recalled: "We quickly assessed the situation. We realised we're up against the bigger portals like AirBnb which was selling accommodation. So we pivoted, focusing on selling local tours and activities. Within three months we changed our portal, and soon business picked up."

Today, bemyguest.com is the largest Asian portal selling tours and activities. It is an example of a product that failed at first because customers were cool to the idea. But there was nothing wrong with the underlying technology.

A smart entrepreneur can adapt a product using an underlying technology, and "pivot" or change direction.

Start-ups often go through a few "pivots" before they hit the nail on the head - as Mr Wong's bemyguest did.

Fail fast, learn faster
ENTREPRENEURS like Mr Wong never say die. A common trait among them is grit and self-belief because they need to plough ahead when everyone tells them they are wrong.

But this can also be a double- edged sword, warned Professor Desai Arcot Narasimhalu of the Singapore Management University. Some entrepreneurs believe in their ideas so deeply that they cannot let go even when the market rejects their businesses.

Therefore "fail fast" is a way to create awareness among entrepreneurs that if the market does not accept their product, they must stop at the earliest possible opportunity, said Prof Desai, director of SMU's Institute of Innovation and Entrepreneurship.

Quick failures save money, time, effort and emotional anguish for the entrepreneur and his team.
Tech entrepreneur Vinod Nair discovered this with his first start-up, an online property search portal called homespace.sg which he co-founded in 2007.

He had applied to a government agency for a grant of $50,000 but was rejected because his subscription-based business was considered not innovative. The founders went back to the drawing board and introduced a more complex payment model. They got the grant.

"Our form of validation was the funding, which I realised was wrong. We were doing everything
around the grant instead of focusing on creating a viable business model," he said.

But by then, competitors like Property Guru had gained market share. By the end of one year, the co-founders were tired, money had run out and Mr Nair had no choice but to close homespace.sg.

He has applied the lesson he learnt to his current start-up, an online financial services firm called Moneysmart.sg. Founded in 2009, it provides online price comparisons for financial products such as housing and car loans, insurance and credit cards.

Moneysmart is available in Singapore, Indonesia and the Philippines. Mr Nair received funding of $600,000 for the project and bootstrapped for five years. Only this year is he raising $3 million for business expansion.

Fail first, then improve
BOUNCING back from failure like Mr Nair did is part of the fail fast, learn quickly concept.  Failure is not the end, for it provides lessons for a new start.

Singapore's largest bank, DBS Bank, discovered this.

In one of its innovation training sessions for staff last year, one team worked on a credit card activation issue.

The problem it wanted to solve: Many customers forget to activate their credit cards and so cannot use them. Dissatisfied, they ring the customer call centre to give their feedback.

Their solution: Send reminders to activate cards via text messages to mobile phones. But this drove up the number of calls to the call centre. When the bank checked with some customers, they said the text messages did not identify which credit card needed to be activated.

DBS' chief innovation officer Neal Cross said: "So we tweaked the text message by including the last four digits of the card to be activated and the complaints went down."

Lesson for DBS: While its assumption that text messages would be welcome was not wrong, it did not understand the customer's behaviour until after it had rolled out the text messaging solution.

Trying out a solution that may fail at first, then getting feedback to modify it helps a business make continuous improvements to create a better product or service.

This is radically different from wanting everything shipshape before rolling out a new product or
service.

Instead of a "fail safe" culture, a "fail fast, learn quickly" culture requires Singapore to embrace a culture where it's safe to fail, and where one learns quickly from failure and tries again.

For students, tinkerers, software developers and engineers waiting to build the next big project, business idea or technology, it is worth noting what American comedian W. C. Fields said: "If at first you don't succeed, try, try again. Then quit. There's no point being a d*** fool about it."

I would add: Try, try again. Then quit. Start something else. Repeat. Till success comes.

Life Insurance Singing

When insurance agents in Indonesia try to “evoke a new spirit,” it isn’t a religious matter. They are revving up to do battle for customers—in song.

From Jakarta to Hong Kong, thousands of life-insurance agents use internal gatherings, such as town halls, to sing songs they have written reaffirming their dedication to selling their companies’ policies. Insurers in at least half a dozen countries rely on the tunes, which range from rock to folk-style, to get agents pysched up before they call on potential clients.

In Indonesia, agents for Manulife Financial Corp. , one of Canada’s biggest life-insurance firms, sing a tune that exhorts the team to “take a step with confidence, move your feet, evoke a new spirit, with Manulife,” to build a prosperous nation. The lyrics of “Growth with Quality” have agents belt out “One team, one dream, and one spirit, Manulife for your future.”

“It is quite unique to Asia from what I have seen,” said Kim Fleming, a Manulife vice president and regional head for agencies in Asia. He likened the singing to sports fans passionately chanting their support for their team.

Corporate songs aren’t unusual globally—company music is often associated with Japanese culture, for example—but executives say the fervor and gusto behind the life-insurance songs in Asia, which are often the initiative of sales staff, take music as a motivational tool to a new level.

Analysts say the singing agents are a reflection of the competitive culture around insurance in Asia. The region is a target of most global players because sales are slowing in developed markets.

Flashy marketing campaigns aren’t uncommon in insurers’ fight for customers. Last year, for instance, Prudential Asia, a unit of the U.K.’s Prudential PLC,sponsored concerts in the region by the Rolling Stones, and the year before, AIA Group Ltd. sponsored a concert by Justin Bieber in South Korea.

Among the insurers in Asia whose agents sing are Prudential, AIA, China’s Ping An Insurance (Group) Co. of China Ltd. and Sun Life Financial Inc., Canada’s third-largest insurance company by assets.

In the Philippines and Hong Kong, agents at Sun Life sing a song titled ‘Under the Sun,” with a chorus that goes: “Shine on, shine on; Experience the Sun, Life is brighter under the Sun, Come on, come on, Experience the Sun, Life is brighter under the Sun.”

“To me it is quite unique here,” Kevin Strain, Sun Life’s president for Asia, said of the singing agents. “I never, ever saw it in North America and I have never seen it in Europe, I have only seen it in Asia.”

Asia is attractive for global insurance firms because of the market’s growth prospects. A smaller proportion of the population has insurance than in the developed world, and the middle class is growing, so more people are able to buy coverage.

At the same time, “there is a massive health-insurance protection gap,” said Robert Burr, head of Life and Health Asia at Swiss Re                 

According to Swiss Re, emerging markets in Asia accounted for 9.8% of life premiums worldwide in 2013—the most recent figures available—compared with 3.3% a decade earlier. In the same period, North America’s share slipped to 23.1% from 29.4%, a reflection of the market’s maturity.

As a result, Asia has emerged as a battleground. Global insurers have hired thousands of sales staff across the region and cut expensive deals with banks to sell policies in their branches.

This month, a host of the world’s biggest insurers, from AIA to MetLife Inc., are expected to bid to be partners with Singapore’s DBS Group Holdings Ltd. , people familiar with the matter said. The winner will be allowed to sell its policies in the bank’s branches in Singapore, Indonesia, Hong Kong and elsewhere in the region.

The pact with Southeast Asia’s biggest bank could be valued at billions of dollars over its lifetime and is one of the few remaining bancassurance deals in the region that is still up for grabs. That narrowing of distribution options means banks will continue to rely on agents to drum up sales.
That is one reason, say insurers in Asia, that a singing agency force will be here to stay.

“When you have a good song, it creates a great identity for the team,” said Huynh Thanh Phong, chief executive officer of FWD, a fledgling insurer backed by Hong Kong billionaire Richard Li . Having a happy sales force is vital to complementing tie ups with banks, Mr. Huynh said.

DBS Bancassurance Deal

AIA Group Ltd, Prudential plc and Manulife Financial Corp are among firms shortlisted to become the insurance partner of Singapore's DBS in a bank distribution deal worth around US$1.5bil, people familiar with the matter said.

 

DBS's bancassurance deal, under which it will distribute products exclusively of the chosen partner over 15 years, is the last major agreement of this kind available for insurers keen to tap into Asia's fast-growing insurance market.

 

Current DBS partner Aviva plc has also been shortlisted for the agreement that starts next year, the people told Reuters.

 

Late last year, DBS hired Morgan Stanley to advise on the deal. It was not immediately clear when the final selection of an insurance partner for DBS would be made.

 

DBS is keen to partner with just one insurer for all the Asian markets it operates in, but to create competition in the process and have flexibility, it has also shortlisted Canada's Sun Life Financial Inc, Richard Li's Hong Kong-based insurer FWD Insurance and Metlife Inc, who have submitted bids only for smaller markets, the people said.

 

DBS and all of the insurers declined to comment. The people declined to be identified as the matter is not public yet. Singapore and Hong Kong - two of DBS's strongest markets - are seen as profitable for insurers due to their status as Asia's main wealth management centres and their ageing populations. DBS also operates in India, Indonesia and Taiwan.

 

The so-called bancassurance model - as opposed to the traditional agency model - is lucrative for commercial banks in Asia because global insurers are willing to pay hefty fees for access to lenders' branch networks.

 

Insurers value the deals because they offer exclusive access to banks' large branch networks across Asia and the opportunity to sell to the bank's customers inside the branches.

 

Asia's largest retail banking networks belong to Citi, HSBC and Standard Chartered, but those deals have already been locked up, leaving DBS as the last major partner available to insurers. — Reuters

DBS's planned deal comes after AIA struck a 15-year exclusive deal with Citibank in Asia, for which AIA said it paid an $800 million upfront payment. Prudential renewed last year a 15-year agreement with StanChart for $1.25 bil.

 

HSBC signed a 10-year deal with Germany's Allianz SE in 2012.— Reuters